Commercial real estate and its effects on the economy

Investors are once again turning to the commercial real estate market for safe profits.

For those assessing the American economic recovery, looking at the commercial real estate market is often an excellent indication of where things are heading. Lately, developments in the commercial real estate market appear to portend good things for the nation's economic standing. Whether you look at Wall Street investments, commercial real estate brokers, or the commercial property management business, all signs point to overall strength.

The ripple effects of commercial real estate
As pointed out by Tammy Cox, who leads the Idaho Property Management division of Cushman & Wakefield Commerce, one of the reasons commercial real estate is so indicative of economic trends is that it reaches into so many different facets of the economy. When commercial real estate is going strong, it creates jobs in dozens of sectors. First, there are the people who work directly in the commercial real estate field. Commercial real estate lawyers and brokers, inspectors and appraisers, lending specialists and tenant representatives all find themselves with more work.

Also, owners and managers will have the capital to invest in their properties, meaning carpenters, roofers, HVAC professionals, landscapers and others in similar occupations will see an increase in work. That job creation turns into a self-perpetuating cycle, since people who run those businesses are going to be more likely to look for office space from which to run their operations. And with upgraded amenities, commercial property brokers and managers can charge higher rents, which again feeds into the cycle.

With commercial real estate bouncing back from the difficult times brought on by the recession, most if not all of these fields are already seeing a noticeable upswing.

Investment in commercial real estate is on the rebound
Another way the commercial real estate market plays an important part in the overall economy is as an investment opportunity. From smaller buyers looking to purchase one or two properties to make some extra income, to larger management companies looking to add to their portfolios, to Wall Street hedge funds, people are once again turning to commercial real estate as a safe, profitable growth area, according to an article by CNBC.com staff writer Jenny Cosgrave.

One area that has seen major gains lately has been real estate investment trusts, which are benefiting from investors who are looking for alternatives to bond funds as rates on those investments continue to climb higher.

"Partly as a result of our views on the potential dangers in the bond market, we have been shifting some of our exposure into property," said Bill McQuaker, head multi-manager at Henderson Global Investors.

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