Multifamily Investing VS. Alternative Investing Options Part 2

A continued look at how multifamily investment stacks up against the competition.

In the first part of this series, we took a look at multifamily investing and compared it to general commercial real estate investing, industrial commercial real estate investing, and office commercial real estate investing. While comparing the multifamily slice of commercial real estate (CRE) investing to the entire body seems a bit unfair, it is important to keep in mind that multifamily investments still make up the largest portion of CRE. Even when compared to office and industrial CRE, multifamily is still a strong competitor for a spot in any investment portfolio.

In the second part of the series, we’ll dive a little bit deeper, and look into how multifamily stacks up against retail, hotel, and self-storage CRE.

Multifamily vs. Retail

The retail real estate sector has had a tough time in the last few years, though things may be on the upswing. As of Q2 2019, the U.S. neighborhood and community shopping center retail vacancy rate sat at 10.1%, and thanks to the national pandemic, any gains the retail industry would have made in 2020 were all but wiped out.

Even so, many would say that retail was always one of the riskiest major commercial real estate sectors to invest in. This is particularly due to economic volatility and the shifts to e-commerce that have lead to major mall and national retail brand closures in recent years. Unlike multifamily investing, which can be a good choice for a wide swath of investors,   many would recommend avoiding retail real estate investing unless you have a larger portfolio of properties that can diversify your returns and reduce overall vacancy risk.

Multifamily vs. Hotels

Hotels are generally considered to be one of the riskiest forms of commercial real estate, particularly if you’re managing the property yourself, and even more so if you own an unflagged (i.e. non-major brand) hotel in a secondary or tertiary market. In some situations, however, landowners in prime areas will offer a long-term land lease to a company to develop a hotel on the property. However, this type of deal is generally well outside the purview of the ordinary commercial real estate investor. 

Multifamily vs. Self-Storage

While self-storage may not be the… “sexiest” type of real estate to invest in, it can be highly profitable for those who know what they’re doing. Just like an apartment or hotel, location is key, but property management costs are relatively low. In 2019, the valuation of the self-storage market reached $87.65 billion and is actually forecasted to reach $115.62 billion by the end of 2025. So, while it may be a profitable industry, the more exciting thing to pay attention to is how it has faired out during this “recession” caused by the pandemic. All of the latest numbers show that the self-storage industry is one of the least affected by the covid-19 downturns that have plagued most other industries. Does multifamily investing finally have a suitable rival?