As you may know, real estate ebbs and flows just like any market. Periods of intense activity can often be followed by a winding down over several months, or even over the course of a year. It is the economy that plays the most pivotal role in these commercial real estate market cycles and any inkling of a recession can cause investors to pause.
So does that mean you should hold off on your investment? Not always. Rather, this calls for investors to make a more strategic move. While you cannot be 100 percent certain that your commercial property is safe from economic ups and downs, there are certain types that are better positioned to withstand a downturn.
Below are five Alaska commercial property types that are more likely to weather a recession:
1. Main street retail
Retail may not be the most recession-proof of Alaska commercial real estate properties, but those placed on urban main streets tend to have a better outlook than those in more suburban locations.
2. Grocery-anchored shopping centers
Think about your local neighborhood shopping center. Even during times of economic stress, you will still need to visit to purchase daily necessities, medications and food, thus making this property type better suited for a downturn. In fact, according to a CoStar research consultant, this year’s CAP rate on neighborhood shopping centers has averaged 7.1 percent.
3. Class B office buildings
There is currently a surplus of Class A inventory and we are now seeing typical class A users downsizing to class B inventory. Class B inventory is filling up while class A inventory remains vacant. Total Class A inventory vacancy increased 2.9% while Class B Vacancy decreased by 1.1% over the same period; this is especially pronounced in the Midtown submarket where demand is the strongest.
4. Medical office buildings
Medical office buildings are currently showing vacancies well below those of general office buildings and tend to stand as one of the most recession-proof commercial properties. The average CAP rate for medical office buildings was also around 7 percent for the third quarter of this year.
5. Storage facilities
During an economic downturn, both companies and individuals are more likely to downsize— a move which creates a need for storage facilities. Any self-storage facility in the Anchorage area that is able to serve both groups places itself in a strong position to survive a recession.
Want more information about commercial properties in the Anchorage AK area? Northern Edge Commercial can help you determine which type is the best investment for you!