The commercial real estate market in the city of Philadelphia is undergoing a renaissance. It is definitely showing signs of recovery and growth. This is a major development. In fact, it is one bit of news that investors have been counting on.
For the longest time, the Philadelphia market has been in a slump since the country’s general housing crisis. Now, it seems, those days have been left behind for good. This simply means one thing: the time to invest in commercial real estate is now.
Of course, it needs to be stated here that navigating any industry market, no matter how positive its outlook may be, without a full understanding of how it works is a recipe for disaster. This is a basic rule that most certainly applies to the commercial real estate market as well. This is something prospective investors should always keep in mind.
This article seeks to teach readers a basic understanding of the different terminology used by real estate professionals. This is so that you can effectively navigate the hectic world of commercial real estate. Hopefully, with our help, you can make the most of this unique opportunity.
Philadelphia commercial real estate market report
With the market still in a state of recover, commercial real estate investors in Philadelphia often make use of different financing tools to acquire properties. One of the most common systems they adhere to is known as the cash-on-cash formula.
This formula makes it so that the investor is not required to provide 100% of the cash in order to buy the property. In other words, initial investments are useful if you want to get your foot in the door.
Philadelphia commercial real estate market trends
In order to fully understand the trends of the commercial real estate market in Philadelphia, one must first grasp the meaning behind the basic terms used by real estate professionals. Presented here are a couple that you must always keep in mind.
- Net Operating Income (NOI) – This is a basic indicator used in the industry. There is a simple formula that one must follow in order to get an accurate NOI for a particular commercial real estate property. All you need to do is take the first year gross operating income and subtract from the operating expenses for that same period. For obvious reason, it is ideal that you attain a positive NOI for your property.
- Cap Rate – This refers to the property’s capitalization rate. This is often used to get the actual value for properties that generate income. To be more precise, cap rates are often used in order to effectively estimate the property’s future profits and cash flow. This is especially useful if you plan on investing on an apartment complex though the same rules also apply when you have commercial office buildings and smaller strip malls.
Commercial real estate market in Philadelphia
The road to industry recovery is never easy. However, it seems Philadelphia is leading the way in a major way when it comes to the commercial real estate market. We highly recommend that readers familiarize themselves with its dynamics if they plan on getting in on the action.