Rising Commercial Real Estate Prices Little Cause for Worry

September 17, 2015

Minnesota investors may be interested to learn that while real estate prices are going up in certain cities, other parts of the country are showing much slower growth. While residential properties are quickly becoming unaffordable for many people in so-called gateway cities such as New York and San Francisco, this is not the picture everywhere.

However, Chicago has seen a record high in the valuation of office buildings. In both Los Angeles and New York, valuations are hitting highs that were originally set prior to 2009.

A CEO of a real estate development company points out that there is unlikely to be a real estate bubble throughout most of the country, and office space is moving slowly. On the other hand, the price of new construction tends to be very high, and developers might hesitate to build new commercial real estate as a result. The CEO also states that in contrast, rentals of multifamily residences are financially healthy.

People and companies that are interested in purchasing, building or developing commercial real estate may want to work with a law firm to do so. Regulations can be complex, and failing to prepare paperwork properly, not observing the right zoning laws or other errors can seriously delay purchase or construction. These delays can mean big costs even in real estate markets where prices are reasonable compared to the rest of the country. For example, an investor may be interested in moving into commercial real estate for the first time. That investor may wish to begin by purchasing a multifamily structure and making improvements. Attorneys might be able to guide clients through the processes of obtaining proper permits for construction and drafting leases as well as on issues such as taxes.

This information is general in nature and should not be construed as tax or legal advice.

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