10 Best Cities For Commercial Real Estate Investment (2022)

With the pandemic ending, the commercial real estate market is on the rise, and property demand is at an all-time high. There are a number of cities right now seeing a real estate boom, and secondary markets such as Austin, Texas or Boise, Idaho are becoming popular investment hubs.

How to Find the Best Cities for Real Estate Investment

For new investors, the question of what to look for when investing in commercial rental property often arises. Of course, the answer depends on the type of rental property one is looking to buy, said Ethan Freilich, a Financing Expert who works in Debt, Joint Venture, & Structured Capital at Lev.

For a retail center, for instance, Freilich said, “you want good foot traffic, and you really want to be in an up-and-coming area where the median income is a certain dollar amount.” Factors, such as population growth, rising local home values and home prices, and a booming housing market, ensure people will be walking by your store and spending money.

It also makes sense to speak to a tax attorney before choosing a state to invest in because, Freilich pointed out, red states and blue states often have different tax laws and business regulations.

“More liberal states have more regulations, and a lot of times higher taxes for business owners and real estate owners, so that plays a role in an investor thinking about where to invest their money,” Freilich said.

It’s also important to look at population growth, job growth and rent growth, said Grigoriy Azayev, Executive Managing Director at Stelth Commercial Real Estate Group. If the population of a city is rising, and the job and real estate markets are booming, that’s generally an indication it would be a good city to invest in.

Other factors to research before choosing a city to invest in include real estate property appreciation and economic growth.

10 Cities with Cash-Flowing Real Estate in 2022

There are a number of up-and-coming cities, along with already established, primary cities in the United States that would make for great opportunities in commercial real estate investment. 2022 so far has proven quite lucrative for real estate investors across the country and, for now, the real estate market is still on the rise.

1. Austin, Texas

10 Best Cities For Commercial Real Estate Investment (1)

Texas as a whole is seeing a real estate boom right now, with Austin — often considered a “secondary city” — becoming a popular locale.

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“Austin has had a lot of population growth over the last couple of years,” Azayev said. “Job growth there has been substantial. Income has risen, and they have great tax loopholes, I guess you could say.”

Not only that, but Google has recently opened a headquarters in downtown Austin, bringing an influx of jobs and employment growth into the city.

Freilich, too, places Austin in his top five list of cities to invest in. Since 2010, home values and home prices in Austin have doubled, and the unemployment rate remains low. Rents are also on the rise, which means more money for property investors in this lucrative housing market.

2. Boise, Idaho

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Boise maintains excellent records for long-term profits on commercial real estate investment, according to Norada Real Estate Investments. Home prices are consistently rising, even during the pandemic.

Freilich described Boise as “a very hot market right now, because it’s a growing area.”

Currently, Boise’s population growth and job growth are triple the national average, and the cost of doing business remains low for now, so it’s a good time to invest in rental properties here.

3. Tampa, Florida

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Tampa is also rapidly growing in terms of population growth and home values. According to Quicken Loans, the 8-year population growth rate of Tampa has been 12.69%, and the 7-year equity growth rate was 106%.

Tampa’s economy is booming, and its job growth rate is 71% higher than the national average. Tampa is also home to four Fortune 500 companies that bring jobs into the city.

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“Tampa, Florida is an example of a secondary market that we’re seeing real estate investors start to invest,” Freilich said.

Not only that, but the warm, sunny weather is a major draw for home buyers and tourists alike.

4. Charleston, South Carolina

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Azayev listed Charleston as one of his top cities to invest in, also because it is one of the fastest-growing cities at the moment in terms of population growth and real estate home values. According to BiggerPockets, rent in Charleston increased by about 6% in 2020, making the city a great opportunity for investors.

The housing market in Charleston is always growing, and the population has gone up by 18.5% in the past two years. It’s also a good vacation spot, drawing in hordes of tourists each year.

5. New York City

10 Best Cities For Commercial Real Estate Investment (5)

It’s nearly impossible to have a list of the best cities to invest in without including New York, an international gateway market. Although real estate investment costs and property prices are high, New York is a primary city that will always be on the rise, and so there’s always a good return on your investment and high rental yield.

Azayev called New York “the number one real estate market.” Although many left the city during the pandemic, bringing rent prices down for a bit, the city is coming back, and the population is growing once again. Azayev is confident that everyone who left New York will be returning, other than those few who would have left for other reasons anyway.

“In terms of investment, the amount of rent, the occupancy levels, appreciation and upside, there’s no city like New York,” Azayev said.

And of course, with real estate costs still somewhat lower than they were pre-pandemic, right now is the best time to invest — before those prices go up again.

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6. Orlando, Florida

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Orlando is another Florida city with booming real estate markets right now, for commercial properties, multifamily buildings and even single-family rentals. One quality that helps Orlando is the tourism industry, with people from all over the world flocking to Disney World and Universal Studios all year long.

With tourism comes an influx of jobs as well, which in turn boosts the housing market and year-over-year rent growth. According to Norada Real Estate, “Tourism and job market growth [in Orlando] in leisure and hospitality are creating a large share of renter households with population growth at 2.4% and household growth at 3.4%”

Investors also have options in terms of what types of renters to target for a rental property, as there are both long-term residential rentals, as well as tourism rentals. Currently, Orlando has a strong renter’s market. Over 60% of the population rents, and the median rent per month is around $1,599.

7. Durham, North Carolina

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The Carolinas are generally a great region to invest in a rental property right now, Freilich said, particularly Durham, North Carolina. The housing market in Durham is on the rise, and has been for quite some time.

Median home prices in Durham are just over $250,000, and the city is home to Duke University and several other colleges and universities, creating a large number of student renters.

8. Nashville, Tennessee

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“Nashville is another big area that’s growing,” Freilich said. In the past year or so, home values in Nashville have gone up by 9.6%, just slightly below the U.S. average of 9.9%, but showing a steady increase that indicates positive change.

According to Rocket Mortgage, “Nashville has ranked in the top 10 metro areas for jobs and economic growth over the last few years.” In fact, The Wall Street Journal claimed that Nashville has the “second-hottest job market” in the country behind Austin, Texas.

(Video) Commercial real estate experiencing 'a flight to quality' through amenities: JLL CEO

Nashville is also a popular tourist destination, known for its restaurants, bars, live music and nightlife, creating a high rental yield as young professionals flock to the area.

9. Grand Rapids, Michigan

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Grand Rapids is an oft-underestimated real estate market in the U.S., and Forbes called Grand Rapids “the fastest growing city in Michigan and one of the fastest growing in the Midwest.” For this reason, now is a great time to invest, as home prices are going up, and the sales-to-list price ratio is above 105%.

In 2020, home prices in Grand Rapids rose by 7% year-over-year, with the housing market still on the rise.

10. Denver, Colorado

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In Denver, rental properties have been steadily increasing in value over the past few years as a result of job growth and tourism in the city. Currently, the Denver unemployment rate is under 3%, and the city consistently has an unemployment rate below the U.S. average.

One of the reasons for the low unemployment is that Denver is home to seven Fortune 500 companies, keeping the job market booming and the influx of new residents high. Rent is also increasing at a rate of about 3% per year.

The Fundamentals of Choosing a City

What all of these cities have in common is they are all seeing substantial growth in 2022. This trend includes population growth, job growth, growth in property value and rent growth and signifies what phase of the real estate cycle each city is in. As Freilich mentioned, there are certain factors to consider that are specific to the type of commercial property you are looking to purchase (for instance, foot traffic for retail centers), so it’s important to do your research as it applies to your investment.

As a whole though, these 10 cities would make for a great commercial real estate opportunity for any investor.

FAQs

What is the most profitable commercial real estate? ›

Properties with the highest number of tenants are the ones that are capable of bringing in the highest ROI. These properties include apartment complexes, office buildings, student housing, RV parks, storage facilities, etc.

What cities have the best ROI? ›

Ten U.S. cities made it to the top 50 on the return on investment list, including Philadelphia, Phoenix, Houston, Sacramento, Tampa, Dallas, Orlando, Nashville, New York and Atlanta.
...
Rank1
CitySaint Petersburg
CountryRussia
Return on Investment (%)31.1
House price growth (%)14.2
49 more columns
21 Feb 2020

What state has the cheapest commercial real estate? ›

#1 – Mississippi. Mississippi is known for having the lowest cost of living in the United States, which is great news for businesses looking to lease or sell properties. It's also very accessible, and there's a lot of space to work with.

What is the average rate of return on commercial real estate? ›

What is an average ROI on real estate? According to the S&P 500 Index, the average annual return on investment for residential real estate in the United States is 10.6 percent. Commercial real estate averages a slightly lower ROI of 9.5 percent, while REITs average a slightly higher 11.8 percent.

Where is best for commercial real estate? ›

The commercial real estate market, not unlike the single-family housing and residential markets, is subject to cyclical trends.
...
Here are some of the top growing commercial real estate markets from 2021:
  • Austin, TX.
  • Tampa Bay, FL.
  • Atlanta, GA.
  • Nashville, TN.
  • Salt Lake City, UT.
  • Raleigh-Durham, NC.
  • Portland, OR.
  • Denver, CO.

Can you get rich in commercial real estate? ›

But when you're talking about going into seven figures in commercial real estate, there are only three tried-and-true roles where you can create real wealth: investor, developer and broker. Successful investors in real estate can build wealth through long-term ownership and consistently building their portfolios.

Where should I invest in property in 2022? ›

12 best places to invest in property in India in 2022
  • Sector 75 – Noida. Being one of the fastest developing locations, Noida definitely is one of the best cities to buy property in India. ...
  • Sector 129 – Noida. ...
  • Wakad – Pune. ...
  • Dhankawadi – Pune. ...
  • Panvel – Navi Mumbai. ...
  • Mahadevpura – Bangalore. ...
  • Hebbal – Bangalore. ...
  • Lucknow.
27 Jul 2022

What city has the most opportunity? ›

New York

What city has the highest success rate? ›

Detailed List Of The Most Successful Cities In America
CityrankUnemployment Rate
Frisco city, Texas14.9%
Cary town, North Carolina25.1%
Naperville city, Illinois46.6%
Centennial city, Colorado36.0%
46 more rows
13 Aug 2016

Is commercial real estate a good investment 2022? ›

Industrial and multifamily properties continue to perform well, and investors should keep an eye on climbing interest rates. Despite rising interest rates—with the potential for more hikes in the coming months—commercial real estate has seen success in 2022.

Is it a good time to invest in commercial real estate? ›

Long Term Outlook for CRE Investors

Depending on your tolerance for risk, there could be some commercial real estate opportunities in 2021 and beyond. “The pandemic accelerated trends such as the hybrid work model and the rise of ecommerce, both of which we'll likely continue to see increase," said Dunn.

What state has the cheapest property per acre? ›

InMyArea.com performed a study that took a look at the median prices per acre in 2021 and found that Arizona had the cheapest median cost per acre, at $4,164. The data includes the price of land with existing homes and the cost of land designated as a homesite were also included so that you can have some comparison.

What is the 1% rule commercial real estate? ›

The 1% rule is an unofficial benchmark that real estate investors use to narrow down profitable investment opportunities. The 1% rule says that investors should only buy properties for which they receive a gross monthly rent payment equal to or greater than 1% of the property's purchase price.

What is a good ROI on commercial property? ›

A good return on investment for commercial properties falls between 5% and 12%. While this is an average figure, it should be noted that a 'good' return is based on conditions such as property type and the local market.

What is the 70 percent rule in real estate? ›

The 70% rule helps home flippers determine the maximum price they should pay for an investment property. Basically, they should spend no more than 70% of the home's after-repair value minus the costs of renovating the property.

Who is the target market for commercial real estate? ›

This is the most common and easiest way to identify your target market. The most successful people in commercial real estate choose from the following: office, medical office, retail, industrial, land, or multi-family.

Is it better to invest in commercial or residential property? ›

Higher return on investment: Commercial properties tend to perform better than residential properties over time, both in terms of income and appreciation. It's also easier to add value to commercial properties, which could make it easier to justify increasing rents.

Is investing in commercial property better than residential? ›

Commercial properties typically offer rental yields between 5% and 12%, whereas residential properties typically offer around 3-4% yields. As a result, commercial investments are more likely to be cash-flow positive than their residential counterparts.

How do people get rich in commercial real estate? ›

Commercial real estate investments can earn money through income or appreciation. Income is produced through the operation of the building, often through tenants making rental payments, while appreciation is earned through an increase in the property's value over time.

Do attractive people make more money in real estate? ›

Researchers looked at listing prices, sales prices and the time properties spent on the market before the sale was completed. In general, the research found that the agents who were rated more attractive had listings with higher prices and larger commissions, which comes from higher sales prices for attractive agents.

Why is commercial real estate so lucrative? ›

Commercial real estate often proves to be profitable for investors because it has some security built in, and because it offers the opportunity to diversify. When a real estate investor purchases a residential property, he or she typically rents it out to just one or two tenants with a lease term of 12 months.

Which cities are best for investment in property? ›

Top Cities for Property Investment in India
  • Ahmedabad : Lesser expect city is experiencing an annual growth of 2-4% in real estate. ...
  • Pune : Pune has always been acknowledged as one of the most livable cities in the country. ...
  • Mumbai : ...
  • Noida : ...
  • Bangalore : ...
  • Chennai.
29 Aug 2022

Which property is best for investment? ›

The best investment property for beginners is generally a single-family dwelling or a condominium. Condos are low maintenance because the condo association takes care of external repairs, leaving you to worry about the interior.

Will properties go down in 2023? ›

Independent economic research consultancy Capital Economics has warned rising interest rates could trigger house prices to go into reverse, suggesting they'll drop by around 5% in 2023 and 2024. While they predict house prices will drop in 2023, they've also suggested price growth will remain strong in 2022.

What cities will grow the most by 2030? ›

Delhi is due to overtake Tokyo as the world's most populous city by 2028, growing to 39 million people by 2030. By that time the current megacities of Mumbai, Kolkata, Bangalore and Chennai will be joined by Hyderabad and Ahmedabad.

What are the 3 fastest growing cities? ›

All the cities on this list grew by at least 4.5%. The fastest-growing cities vary greatly in their overall population and what makes them attractive.
...
The Fastest Growing Cities In America.
City, StateGrowth Rate
1.Buckeye City, Arizona5%
2.New Braunfels, Texas2%
3.Apex, North Carolina8%
4.Frisco, Texas6.1%
16 more rows
24 Nov 2021

What is the most booming city in America? ›

Modest Housing Unit Growth in Nearly All States
Table 3. The 15 Most Populous Cities on July 1, 2021
RankArea NameState Name
1New York cityNew York
2Los Angeles cityCalifornia
3Chicago cityIllinois
12 more rows
26 May 2022

Which city is best in future? ›

Berlin, London, Stockholm, Seoul, Hong Kong, New York, and San Francisco are all considered future-focused cities in 2020 based on factors such as sustainability initiatives, use of disruptive technology, economic growth, and physical and financial health of the average resident.

What city is growing the fastest? ›

The "2022's Fastest-Growing Cities in the U.S., Ranked" report took a look at the nation's 50 largest metropolitan areas. San Francisco came in at No. 1, followed by Austin and Seattle.

What city has the best quality of life? ›

2019 city ranking
RankCityCountry/region
1ViennaAustria
2ZürichSwitzerland
3VancouverCanada
3MunichGermany
6 more rows

What is the future for commercial real estate? ›

The key to success will be adaptability, as the industry needs to evolve to meet the changing needs of businesses and consumers. If you're considering selling your commercial real estate property, 2022 could be a good time to do it. Prices are expected to start rising again as the economy recovers.

What is the hottest real estate market 2022? ›

Mountain West, Midwest, and housing markets outside of the Boston area topping their list for 2022's hottest real estate markets. These markets have thriving local economies with low unemployment rates. They've also had significant employment growth since last year.

Why commercial property value is going down? ›

Tighter financial conditions tend to have a direct impact on commercial property prices by making it more expensive for investors to finance new deals or refinance existing loans, thereby lowering investment in the sector.

What is the 2% rule in real estate? ›

The 2% rule states that the monthly rent for an investment property should be equal to or no less than 2% of the purchase price. Here's an example of the 2% rule for a home with the purchase price of $150,000: $150,000 x 0.02 = $3,000.

What happens to commercial real estate in 2022? ›

Commercial Real Estate Market Growth

The commercial property market is anticipated to expand at a CAGR of almost 13 per cent from the projected period of the fiscal year 2022 to 2027, according to the Mordor Intelligence study.

Do commercial properties make money? ›

Is commercial real estate investment profitable? A. It is one of the best ways to grow your money. Commercial properties can garner superlative returns and significant monthly rental income in areas where there is a limitation on new construction by the availability of land or law.

Who owns the most land in the USA? ›

The 2022 Top Landowners in the Land Report 100:
  • The Emmerson Family – 2.33 million acres.
  • John Malone – 2.2 million acres.
  • Reed Family – 2.1 million acres.
  • Ted Turner – 2.0 million acres.
  • Stan Kroenke – 1.627 million acres.
11 Jan 2022

What state has the highest land value? ›

The state with the cheapest land in the U.S. is Wyoming, where one acre costs an average of $1,558. The state with the most expensive land in the U.S. is New Jersey, where one acre costs a whopping $196,410. The average acreage of property in the U.S. is 10,871 square feet, or a quarter of an acre.

What is the 50% rule in real estate? ›

The 50% rule in real estate says that investors should expect a property's operating expenses to be roughly 50% of its gross income. This is useful for estimating potential cash flow from a rental property, but it's not always foolproof.

What is the 80% rule in real estate? ›

The 80% rule means that an insurer will only fully cover the cost of damage to a house if the owner has purchased insurance coverage equal to at least 80% of the house's total replacement value.

What is the golden rule in real estate? ›

In its final paragraphs, the Preamble cites the Golden Rule: “In the interpretation of (these) obligation(s), REALTORS® can take no safer guide than that which has been handed down through the centuries, embodied in the Golden Rule, 'Whatsoever ye would that others should do to you, do ye even so to them. '”

What type of commercial real estate is the most profitable? ›

Properties that are capable of bringing in the highest return on investments are typically those with the highest number of tenants. These commercial real estate properties can include multifamily projects, student housing, office space, self storage facilities, and mixed use buildings.

What are the disadvantages of commercial property? ›

The Cons of Commercial Real Estate Investing
  • Time requirements. Commercial real estate requires more due diligence than residential. ...
  • Monetary requirements. Commercial properties tend to be much more expensive than residential properties, representing a bigger barrier to entry. ...
  • Risks. ...
  • The need for professional advice.
15 Aug 2021

Why do people like commercial real estate? ›

More Flexibility

If you don't enjoy the constricts of the typical 9-to-5 life, commercial real estate is an excellent choice for you. Commercial realtors spend a great deal of time meeting with potential clients or attending networking events; these activities can be scheduled around your time and preferences.

What is the Warren Buffett Rule? ›

The Buffett Rule is the basic principle that no household making over $1 million annually should pay a smaller share of their income in taxes than middle-class families pay. Warren Buffett has famously stated that he pays a lower tax rate than his secretary, but as this report documents this situation is not uncommon.

What is the 5% rule in real estate? ›

Multiply the value of your home by 5%. Divide by 12. The result is the breakeven point, where renting is financially equivalent to buying.

What is the 90 day rule in real estate? ›

If you plan to purchase a flipped home with an FHA loan, you must abide by the FHA 90-day flipping rule. This rule states that a person selling a flipped home must own the home for more than 90 days before home buyers can purchase the property.

What is the most profitable way to invest in real estate? ›

The real estate appreciation investment strategy, referred to as the buy-and-hold strategy, is the top method of investing in long term and short term rentals. In short, appreciation is another reason why rental properties are the best type of real estate investment.

Is investing in commercial property a good idea? ›

In fact, rental yields from commercial property beats residential property hands down. The yield is usually in double digits from commercial property. This is the single largest advantage of investing in commercial realty estate. Sometimes, it can even be 12-14 percent if the location and condition is good.

Do most millionaires do real estate? ›

Some of the most successful entrepreneurs in the world have built their wealth through real estate. In fact, it's estimated that 90% of all millionaires invest in some form of real estate. There are several reasons for this, but in today's article, we'll share seven reasons why millionaires invest in real estate.

Where is the best place to start real estate investing? ›

Best Cities For Real Estate Investment
RankCityHome Appreciation (%)
1Fort Wayne, Indiana14.62
2Toledo, Ohio13.53
3Indianapolis, Indiana14.62
4Cleveland, Ohio13.53
21 more rows

What investment is better than real estate? ›

Historically, the stock market experiences higher growth than the real estate market, making it a better way to grow your money. Stocks are more volatile than housing, making real estate a safer investment. Stocks have no tangible value, whereas real estate does.

What type of real estate investment has the highest ROI? ›

The type of real estate that can offer the highest return on investment is apartments. Anything with 32 units or more will give you the most cash possible in a short amount of time.

Is now a good time to invest in commercial property? ›

Depending on your tolerance for risk, there could be some commercial real estate opportunities in 2021 and beyond. “The pandemic accelerated trends such as the hybrid work model and the rise of ecommerce, both of which we'll likely continue to see increase," said Dunn.

Why is commercial real estate better? ›

Higher return on investment: Commercial properties tend to perform better than residential properties over time, both in terms of income and appreciation. It's also easier to add value to commercial properties, which could make it easier to justify increasing rents.

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