Episode 218: The Future of Commercial Real Estate Investing in Major Cities with James Nelson

The REI Diamonds Show-Real Estate Investment Podcast

Episode: The Future of Commercial Real Estate Investing in Major Cities with James Nelson

Guest: James Nelson is an industry expert in commercial real estate with over 20 years of experience. He is a Principal and Head of Tri-State Investment Sales at Avison Young, one of the world's fastest-growing commercial real estate services firms.
Big Idea: In this podcast, James Nelson shares valuable insights into investing in commercial real estate in major cities like New York and Chicago. He discusses the challenges and benefits of doing business in these cities, the importance of thorough due diligence, and the potential for value-add opportunities in "tired" assets. Nelson also emphasizes the significance of location in real estate investing and provides guidance on navigating current challenges in the industry, such as the shift towards e-commerce and the need for more flexible office spaces.
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Resources mentioned in this episode:
https://JamesNelson.com/

View the Episode Description & Transcript Here:
https://reidiamonds.com/the-future-of-commercial-real-estate-investing-in-major-cities-with-james-nelson/

Dan: So I was going to make a little bit of a perception of the New York real estate market from around the country, right? Oh, it’s overpriced, it’s outrageous. The price of land in Manhattan and those kind of things that we all hear around the country, it’s like, who could ever buy anything in New York, anywhere in the city and be successful at the way the prices are? So that was growing up in Philadelphia, James, so that’s my perception, right? We would get the New York buyers who would come down and see Philadelphia as just like discount bargain just pay cash for it. Who needs a mortgage kind of a market. Well, when I got to Chicago, Chicago had a similar, very priced out type of feel to it coming from Philadelphia. And long behold, it does work and you can’t make money.
Sometimes those high price points offer things like high commissions and high profit spreads and 8,9,10%, or even 3 or 4% appreciation on a larger number is larger numbers at the end of the day as well. So I’ve gotten more comfortable with the higher price points myself personally. And I’m curious, as we kind of get into today’s show, I imagine cut your teeth in the New York market, and it’s a high price point market we all know that. I’m excited to kind of hear today’s show with that frame, if you will.
James: Sure, yeah. New York certainly is a place to live. It is very expensive. So a studio apartment here is $3,000 a month. The median apartment sells for, I think it’s 1,000,00.
Dan: Wow.
James: So yes, it is certainly expensive. When you’re looking to buy here on the commercial side yes, the barriers of entry are high because there is global demand looking to purchase properties here in New York, when we talk commercial, I’m talking multi-family with five or more units. I’m talking retail, office development, industrial, and there’s only about in Manhattan about five or 600 of those sales that happen a year. So there’s always this supply demand imbalance. And so the New York terms here are very challenging, especially for kind of the first time investor because most of our deals are signed with a 10% hard deposit due diligence done prior to contract signing. So that’s pretty daunting to jump in and have to put in hard money day one, really tough when you’re buyer, but when you’re looking to turn around and sell again, the market is liquid. So there are challenges to break into this, but once you’ve been able to secure an investment, if your business plan is to resell, you’re going to have a much easier time exiting when the time is right.
Mike & I Discuss:
- The challenges and benefits of investing in commercial real estate in major cities
- The importance of thorough due diligence in real estate investing
- The potential for value-add opportunities in "tired" assets
- The significance of location in real estate investing
- Navigating current challenges in the industry, such as the shift towards e-commerce and the need for more flexible office spaces
Relevant Episodes: (There are 218 Content Packed Interviews in Total)
- Josh Inglis on Building New Construction & Selecting Rentals on Chicago’s South Side
- Getting High Return on Investment through Co-Living Rentals with Johnny Wolff
- Negotiating No Money Down Commercial Real Estate Deals with Peter Conti
- Leverage to Larger Deals Using Family Office Wealth with Richard Wilson