Top 5 U.S. Cities for First-Time Commercial Real Estate Investors

Investing in commercial real estate can be a lucrative venture, offering opportunities for significant returns and portfolio diversification. For first-time investors entering this market, selecting the right location is crucial for success. Some key factors to think about when choosing which market to enter into are population growth, job growth, and high rental demand. Here are the top five U.S. cities that offer promising prospects for first-time commercial real estate investors:

1.) Nashville, Tennessee

Commonly known as, “Music City”, Nashville has emerged as a hotspot for commercial real estate. The city’s strong job market is fueled by tourism, finance, and healthcare, and has forced the need for more office space as well as retail space. Nashville’s business-friendly environment yields a promising opportunity for first-time commercial real estate investors. This is a prime area for not only alternative lending opportunities, but SBA products geared towards those small and/or new businesses could be an excellent route as well. 

 

2.) Atlanta, Georgia

Known as the economic hub of the Southeast, Atlanta boasts a thriving business environment and a rapidly growing population. The city's diverse economy, which includes sectors like technology, finance, and logistics, provides ample opportunities for commercial real estate investments. Additionally, Atlanta's favorable tax environment and relatively low cost of living make it an attractive destination for businesses, driving demand for commercial properties.

 

3.) Austin, Texas

In recent years Austin has experienced rapid population growth, and is home to a burgeoning tech scene and a dynamic entrepreneurial culture. The city's strong job market, fueled by companies like Dell, IBM, and numerous startups, has led to increased demand for office, retail, and mixed-use developments. With a vibrant arts and entertainment scene and a high quality of life, Austin offers attractive investment opportunities for first-time commercial real estate investors. From large commercial loan opportunities to small-business ventures, the commercial lending space here is especially unique.

 

4.) Denver, Colorado

Situated at the foothills of the Rocky Mountains, Denver combines natural beauty with a booming economy, making it an appealing destination for commercial real estate investment. Its strategic location as a transportation and logistics hub, coupled with a diverse economy spanning industries such as aerospace, healthcare, renewable energy, and cannabis, contributes to its allure. Denver's young and educated population, alongside a burgeoning tech sector, further augur well for the future growth of the commercial real estate market. Notably, Denver's cannabis industry stands as a trailblazer in the landscape of legalized marijuana since the state's landmark legalization of recreational cannabis in 2012. Emerging as a leading destination for cannabis enthusiasts and entrepreneurs, the industry continues to thrive, significantly contributing to the city’s economy.

**It is important remember that the cannabis laws vary by state

 

5.) Seattle, Washington

Home to tech giants like Amazon and Microsoft, Seattle has become synonymous with innovation and economic growth. The city's thriving technology sector, combined with a highly skilled workforce and a culture of entrepreneurship, has led to sustained demand for commercial real estate properties. From office buildings in the bustling downtown area to mixed-use developments in vibrant neighborhoods, Seattle offers diverse investment options for first-time commercial real estate investors seeking exposure to a dynamic and rapidly evolving market.

 

These five U.S. cities present attractive opportunities for first-time commercial real estate investors looking to enter the market. From Atlanta's diverse economy to Seattle's tech-driven growth, each city offers its own unique advantages and potential for success. However, as with any investment, thorough research and due diligence are essential to making informed decisions and maximizing returns in the competitive commercial real estate landscape.


Cash-Out Refinance Helps Client Pursue Projects on Raw Land

In December 2022, our client closed on the cash out refinance of an existing loan. The loan proceeds for this deal will be used to pay off not only current debt, but will also provide working capital for our client to pursue other projects. The collateral property is located in Nashville, Tennessee. While LTV for raw land is lower, we love working raw land deals because the possibilities for our clients are endless! 

Requested amount: $6,000,000  //  Property size at 120.57 acres of raw land  //  LTV at 35%


Commercial Capital BIDCO: A Phalanx Against Uncertain Times

Wow is an understatement for how we are feeling! Thank you to DealMaker Magazine for highlighting our very own COO, Jeff Luker, as part of this year's Hot List. Check out the full interview and article below as well as on DealMaker Magazine's website linked here.

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“A man’s character is known by the kind of company he keeps.” – Proverbs 13:20

Fresh out of college, Jeff Luker, now COO of Commercial Capital BIDCO, worked in car sales for about eight years, running sales teams and finance departments. During that time, he gained insights he’d used later in his career in the world of commercial loan brokerage and lending. Citing the similarities between selling a car and closing a loan agreement, Luker says the biggest difference was learning patience, as loans can take up to 90 days to close, whereas a car sale is same day. Otherwise, the transition to Alternative Capital Solutions, Commercial Capital BIDCO’s affiliate company that was founded prior to the bridge lending firm, was natural and paved the way for Commercial Capital BIDCO to thrive as one of the most important departments in the two firms, second only to the rapidly expanding underwriting department. Luker has great pride in the company’s culture, one he says is unique and essential to its brand. Having been in his role for more than seven years, Luker says his team uses great continuity to perform on all cylinders, giving clients a consistently well-rounded experience.

Specializing in short-term real estate-backed bridge loans, Commercial Capital BIDCO finances deals ranging from $250,000 to $2 million but can go as high as $6 million. With a team 10 members strong, Luker is proud of Commercial Capital BIDCO’s strong cohesion, which aligns with the company’s ethos of doing whatever it takes to get the borrower the best outcome — even if that means sending them to a permanent lender.

As COO, Luker’s role is primarily to work with brokers who send loan requests in for clients, vetting those requests through underwriting and then contacting and closing the deal with approved clients. The rest of the team fills in each other’s shoes. Since they have worked together for years, teammates are able to pick up the slack to get every viable deal out the door. And with an increased focus on credit quality, the company is adding more underwriters to its team and Luker says there is no end in sight for the company’s expansion.

“Even though we’re a short-term bridge lender with an average closing time of about 17 days, and even with as quickly as we work, we still do a full doc underwrite on every deal,” Luker says. “We’ve had a lot of banks in our area tell us that our underwriting is just as good if not better than theirs. Of course, one reason for that is because when a banker underwrites a loan, they’re slanting it to what their chief credit officer wants to see. We can’t do it that way. Since we can help with the permanent loan as well, we position our package so that we can quickly turn it to a permanent package. And if we’re going to do that, then it’s going to have to have a wide audience.”

Having a permanent package option has proved to be essential for Commercial Capital BIDCO because, as the past few years have shown the world, the unexpected can and will happen. When solutions for borrowers dry up due to market fluctuations, Luker and his team aim to be in a position to find a permanent solution to their lending needs. While the company doesn’t have a minimum credit score for its loans, it does stray away from risky or speculative proposals and focuses heavily on the front end so the client knows what they are signing up for.

“Brokers call us frequently asking for our loan parameters, our minimum credit score and our minimum debt service,” Luker says. “We don’t really have any of that because each project is different and unique. We prefer to look at things on a case-by-case basis. We want to see what makes sense. Sometimes you’re getting your cash flows up and your debt service is not good, but if we can build in an interest reserve that makes sense to give you time to build it up, then the project does make sense. We don’t have any sort of hard and fast rules on our loans, and that speaks to our flexibility. We want to do loans that make sense and loans that have a clear-cut takeout.

“I think a lot of brokers and borrowers, when they come to us, a lot of times are gun shy. You never really trust a lender until you have a loan funded with them, and I understand that. But I think that once we get through the process and we’ve funded the loan, a lot of borrowers and brokers see that we’re really fast and we’re really very easy to work with.”

Looking into the current and immediate future for the state of the U.S. economy, property values will decline as rates rise. Commercial Capital BIDCO’s activities are all real estate backed, so being careful with valuations is a top concern for the team. When starting a new loan process, the team may run into a prospective client with an appraisal that is six or eight months old. Based on the company’s loan policy, the team may still accept that appraisal, but will go further to investigate, making sure it is a good fit before asking for an updated appraisal. This has always been a checkpoint in the loan process at Commercial Capital BIDCO and will continue to be as the economy ebbs and flows.

With a possible recession in the coming years, Luker believes it will be pertinent for his team to continue being flexible as well as sharpening their already effective strategies in regards to building the best funding packages for their clients. Rising interest rates will actually be a boom for the short-term bridge loan lender and Commercial Capital BIDCO is ready to take on the challenge of funding deals for an influx of borrowers looking for a lending solution.

ABOUT THE AUTHOR: Ian Koplin is an editor of DealMaker.


Residential Property in Tennessee Closes in 14 Days

Commercial Capital BIDCO's client was able to close on the refinance of a residential property in Columbia, Tennessee in April of 2022. The client used a portion of the loan to buy out an investor while the other portion will be used to finish construction of the house. The requested loan amount was $250,000.00 and we were able to get this closed in just 14 days.


Refinancing Deal for Tennessee Manufacturing Plant

We were able to help our client close on the refinance of a cloth materials manufacturing property and the accompanying land on June 1, 2022 in Church Hill, Tennessee. The client was excellent to work with and we were able to close quickly on this 283,197 sq ft property along with the 167.55 acres. The LTV with this deal was 63% and requested loan amount was $3,022,500.00.

A portion of the loan was used to pay off existing loans, and the remaining portion was used as working capital.


Why Invest in Commercial Properties in 2022

Commercial Real Estate has shown significant growth in 2021 over what will forever be known as a year of uncertainty in 2020. What was once considered a shuttering market just over a year ago, multi-family residential is full steam ahead while industrial and office space properties are also ticking upwards. With so many changes over the last 18 months, you may be asking yourself, “Why invest in a commercial property?” Our question for you is, “WHY NOT?”

 

According to the "May 2021 RCA CPPI: U.S." summary report, U.S. commercial real estate prices rose at a 1.3% annual rate from April 2020 to 2021. Driving that increase were apartments (up 7.6% year over year) and industrial properties (up 9.4%), the retail sector (up 1.3%), and office buildings (up 3%). – Millionacres.com

 

Commercial and Office Spaces:

From the rise of unique office spaces, the opening of satellite offices in suburbia as well as the reopening of corporate headquarters, offices are seeing a resurgence and where they’re popping up is a surprise to many.

 

With many companies now embracing a strong sense of employee culture that includes comfortable yet trendy surroundings, loft offices are some of the more popular choices across several industries – turning what were once retail-only spaces into multi-use spaces. Now these property types are an appealing investment choice for many who are looking for a diverse portfolio with more limited means.

 

Suburban office space and smaller square feet options for satellite offices are also excellent investment opportunities for those looking to invest in a property outside of a metro locale. This also allows the property owner to work with an experienced tenant who has other offices established in other locations. These general use spaces are also easily flipped allowing a new tenant to take over quickly and easily.

 

While not increasing as quickly or as steadily as residential, office space will continue to tick upward as employers finalize their reopening plans and prepare for most employees to transition back into offices full time over the next year.

 

Retail Brick-and-Mortar:

Retail will continue to evolve and find its pace over the next 12 months. One of the most hard-hit markets due to the pandemic, retail owners saw a surge in online sales, however, an increase in sales also occurred via curbside orders. This particular piece to the sales pie increased alongside a retail company’s increase in direct social media posts – allowing buyers to “shop a store’s social media,” purchase their products locally while also being able to receive their products same-day.

 

With this, we will see locally owned retail opting to keep their brick-and-mortar store fronts, but possibly look to increase their product storage and reconfigure their backstock needs as curbside orders continue and online orders increase.

 

“Same Day Pick-Up!” “Curbside!” These are phrases that have been promoted to buyers since the start of the pandemic – even across larger brands and corporations – allowing buyers to enjoy a slightly altered shopping experience while also receiving goods same-day as opposed to shipping and possible delays.

 

Strip malls and larger retail developments have also adjusted their selling strategy by implementing these additional forms for buyers to receive their purchases – not just locally owned mom and pop stores. While not an ideal situation in an uncertain world, these adjustments helped to keep the doors open for retail – small and large – assuring investors that these particular sectors of commercial real estate were still very active and growing.

 

Multi-Family Residential:

The start of the pandemic saw college students, new graduates, young families and more moving back home with their parents or to other shared living situations with friends and family. The uncertainty of the economy produced a boom of residential real estate listings, however with states now opening back up, markets are seeing a resurgence of individuals and families needing temporary and/or more budget-savvy living options such as apartment and condo rentals. Multi-family commercial real estate has witnessed the greatest increase of growth and will continue to do so as more states, universities and places of employment begin to open back up to pre-pandemic standards.

 

What to Do Now

Always weigh the pros and cons to any investment situation as well as play out each scenario – especially if you are a first time commercial real estate investor – however, striking while the iron is hot will be key to maximizing your investment and cash flow early on. With unique opportunities on the rise across all branches of commercial real estate, investors will be able to build a path that suits their goals. Lending experts – such as our team at Commercial Capital BIDCO – can assist you with the funding you need that the banks simply cannot do. We are proud of our in-house credit team as well as our in-house credit committee that both allow us to process loans quickly and easily. What are you waiting for? We’re ready to talk investment goals when you are!