How to Properly Invest in Real Estate: Useful Tips

Offices, warehouses, and other premises have always been considered a pillar of stable investments, capable of generating passive income and protecting capital from inflation. However, the modern market is constantly changing, offering both new opportunities and hidden risks. Before making a decision, it is important to understand whether investing in commercial real estate was worth it and what factors need to be considered for a successful investment. Let’s delve into the article.

Investment Potential and Logic

In 2024, analysts at Knight Frank recorded a 9% increase in investments in commercial properties compared to the previous period. The main flow is directed towards retail spaces, warehouse complexes, and street retail. Investors choose not the “type of property,” but the formula: investment – rent – stable income – capitalization.

When evaluating, it is important to consider the profitability of commercial real estate. For example, renting an office in the business district of Moscow (class B+) provides an annual return of 9 to 12%. In regions, it ranges from 11 to 14%, depending on the location, condition of the property, and tenant.

Pros and Cons of Commercial Real Estate: Is It Worth Investing In

The parameters of risk and benefit are not symmetrical. A formal approach does not work here – what matters is the live arithmetic of the property, business environment, and strategy.

Pros:

1. High profitability compared to residential properties – 3-5 percentage points higher.
2. Possibility of long-term lease with corporate tenants.
3. Transparent payback – usually 7-10 years, sometimes less with successful resale.
4. Manageability: rental spaces are easier to adapt to changes in strategy (reprofiling, subleasing, redevelopment).

Cons:

1. High entry threshold – initial investments start from 8-12 million ₽ in million-cities.
2. Dependence on the business cycle and macroeconomics.
3. Vacancy risks – up to 25% of properties in small cities remain vacant for over 3 months.
4. Requirements for active management – tenants often make technical and operational requests.

An objective assessment of the pros and cons forms a realistic picture of investments and helps avoid illusions at the start. Only a balanced consideration of benefits and risks provides a stable investment result.

Strategy – It’s Not “Buy and Forget”

The choice of property and goals determines not only income but also the type of management. Is it worth investing in commercial real estate? Yes, if you are ready to apply effective strategies.

These can be:

1. Long-term lease. Often used in offices, production, and logistics facilities. Suitable with a large tenant. Example: leasing a logistics complex to Wildberries in the Moscow region – payback in about 8 years.
2. Resale. Works in areas with a shortage of spaces in fast-growing locations. For example, from 2022 to 2024, the average market price per square meter of office space in Yekaterinburg increased by 16%. Reselling after cosmetic repairs yields a capital growth of up to 20%.
3. Functional conversion. Street retail spaces are often transformed into cafes, coworking spaces, mini-offices – a strategy suitable for high foot traffic and lack of specific services.
4. Mixed model. Combination of leasing and subsequent sale in 3-5 years. Used with partial occupancy or expected market growth.

Each strategy requires a clear calculation of timelines, resources, and conditions to maximize income. A flexible combination of different approaches ensures portfolio adaptation to changing market conditions and investor goals.

Is It Worth Investing in Commercial Real Estate in Terms of Profitability and Return

Analysis of each property starts with the question: what is the payback period of commercial real estate in the current market cycle? A typical 120 m² office in St. Petersburg with an average rental rate of 2,000 ₽/m²/month generates 240,000 ₽ of income per month. Annual turnover is 2.88 million ₽. With a purchase price of 26 million ₽, the payback period is approximately 9 years without considering taxes and maintenance costs.

The profitability of commercial real estate in street retail (assuming full occupancy) ranges from 10-14%. However, with an anchor tenant and effective management, it can reach up to 18%. For comparison, the average return on bank deposits in 2025 is around 9.25%.

Commercial Spaces: Details Defining Success

The property area is not just square meters but also context. 80 m² in a high-traffic location in Krasnodar will bring more profit than 200 m² in an industrial zone in Vladivostok. The formula for success is composed of location, traffic, premises condition, and tenant profile.

The most sought-after commercial properties are in locations with high traffic and developed infrastructure. For example, Taganskaya Street in Moscow provides a footfall of up to 12,000 people per day – renting space here ensures stable income with minimal vacancy risks.

It is important to consider the legal cleanliness of the property and the availability of necessary permits. Every investor must check this aspect during the comprehensive company due diligence process.

How an Investor Chooses a Commercial Property

When analyzing a project, it is important to consider not only the income potential but also alignment with goals, risk level, and management capabilities.

Checklist for assessing a business asset:

1. Location: proximity to the center, transportation accessibility, pedestrian traffic.
2. Type of property: office, retail space, warehouse, coworking, apartment-hotel.
3. Condition: level of renovation, engineering communications, facade.
4. Tenant profile: large business, local brand, service companies.
5. Contractual terms: lease term, indexation, deposit, rent-free periods.
6. Legal cleanliness: property ownership, absence of encumbrances.
7. Yield: actual rental rate, management costs, taxes.
8. Growth potential: area development, infrastructure improvement, demand.
9. Exit strategy: resale period, liquidity, potential profit.
10. Competition level: saturation in the location, presence of similar properties.

Precise calibration of all points allows for building a managed model with predictable income and minimized risks. An error at any stage leads to loss of liquidity and reduced profitability.

Market and Risks

Commercial real estate as an investment depends on market fluctuations. Construction pace, mortgage rates, tax burden, and consumer activity determine how stable the segment is.

The office market in Russia in 2025 shows a modest growth of 3.7%. Meanwhile, the warehouse real estate segment remains in demand: Amazon, Ozon, and Wildberries continue to expand their logistics spaces.

The main risks include vacancy, inflation, reduced tenants’ purchasing power. Property management requires a professional approach: from sound contract negotiation to regular technical maintenance.

So, Is It Worth Investing in Commercial Real Estate?

So, is it worth investing in commercial real estate? The answer depends on your goals, planning horizon, and readiness to actively manage the process. Commercial properties are not just spaces but assets that generate income, requiring a clear strategy and in-depth analysis. Without a clear plan and market understanding, even the most attractive location does not guarantee profit.

In conditions of financial market instability, growing inflation, and transformation of business models, investors are increasingly turning their attention to the commercial real estate segment. One of the most stable directions remains the warehouse industry.

The reasons to invest in warehouses go far beyond current yields — it’s about a strategic approach to capital protection, growth, and portfolio diversification.

Demand and Market Stability in the Warehouse Real Estate Sector

In recent years, the logistics market has undergone significant changes. The growth of e-commerce, distribution consolidation, and import substitution have led to a sharp increase in demand. The stability of the warehouse real estate market has been proven by the pandemic and external economic pressure — warehouses have remained among the few properties with a stable demand.

Vacancy rates in Class A and B remain at a minimum level, with demand exceeding supply, creating favorable conditions for investors seeking long-term, reliable instruments with predictable returns and minimal risks.

Yield and Asset Management

One of the key reasons to invest in warehouses is the stable yield they offer. Unlike residential or retail properties, warehouses cater to long-term tenants with industrial or logistics specifics. Contracts are typically signed for 5–10 years, and rate indexation allows for maintaining attractive profitability.

Furthermore, effective asset management can further increase profits through modernization of properties, improvement of logistics solutions, or enhancement of energy efficiency. Thus, warehouses become not only profitable but also manageable in terms of cost optimization.

Investing in Warehouse Real Estate through REITs: What Is It?

Not all investors are ready for development projects or direct ownership of properties. In such cases, REITs become an effective instrument. These are closed-end real estate investment funds managing a pool of properties with distributed risks and centralized management.

REITs allow participation in the rental business without direct property management. This model is convenient for both private investors and institutional players looking to diversify their portfolios.

Segment Advantages: Reasons to Invest in Warehouses

The warehouse real estate market has a set of competitive advantages that make it particularly attractive. Below are the main points explaining why this segment maintains its investment attractiveness in the long term:

• Stable demand from e-commerce, FMCG, and retail;
• Limited supply of quality spaces, especially in regions;
• High profitability compared to residential and retail properties;
• Low sensitivity to seasonal fluctuations;
• Predictable rental flows with long-term contracts;
• Potential for tax optimization when owned through a legal entity or REIT;
• Capitalization growth potential through development or reconstruction.

These factors instill confidence in the reliability of the instrument and justify investments in the sector even in unstable conditions.

Role of Logistics and Infrastructure in Investment Strategy

A warehouse is not just a concrete box but a logistical hub that determines the efficiency of the tenant’s business. The choice of location directly affects the property’s demand: proximity to highways, railway lines, industrial zones, and distribution centers significantly enhances its liquidity. One of the key reasons to invest in warehouses becomes the strategic location that ensures stable demand from tenants and logistics operators.

Modern complexes are equipped with IT accounting systems, loading automation, and energy-efficient solutions. Such properties are in demand among tenants and demonstrate low vacancy rates. As a result, the profitability of warehouse real estate increases, and infrastructure maintenance costs are covered by high utilization.

Tenants as a Stability Factor

Unlike residential tenants, legal entities sign long-term contracts. The segment includes major logistics operators, distributors, and manufacturing companies. Their interest in quality spaces ensures stable rates, and timely service contributes to retaining clients for the long term.

Furthermore, amid the reduction of office spaces and declining revenues in shopping centers, the logistics market shows the opposite trend — expansion of areas, broadening of the client base, and reduction in vacancy rates. All these are key reasons to invest in warehouses in the current realities.

Long-Term Trends: Development Prospects

It is expected that in the coming years, the demand for warehouse properties will continue to grow. Reasons include the development of e-commerce, the implementation of Industry 4.0, the growth of local production, and the transformation of logistics chains. Developers are increasingly focusing on building for specific tenants (built-to-suit), reducing development risks and increasing the liquidity of finished properties.

Design flexibility, scalability, rental rate growth prospects, and infrastructure development all strengthen the position of warehouse real estate as a financial asset.

Incorporating Warehouses into an Investment Portfolio

To form a balanced asset mix, it is important not only to invest in profitable warehouses but also to clearly define the share of investment capital they should occupy in the portfolio. One of the significant reasons to invest in warehouses is their ability to provide a stable cash flow with relatively low risks. Below is a list of approaches on how to include logistics properties in a strategy:

• Acquire a property directly and lease it out;
• Invest in a REIT with a diversified pool of warehouses;
• Become a co-investor in a development project;
• Utilize REIT structures abroad.

This strategy allows for combining liquidity, profitability, and reducing dependence on stock markets.

Reasons to Invest in Warehouses: Conclusion

A combination of factors, including high demand, stable rates, and predictable profitability, explains the key reasons to invest in warehouses. It’s not just about a reliable asset but also about a stable element of a strategic portfolio.

In the midst of structural changes in logistics and trade, warehouses become the link on which the real economy relies. Similar to how a rental property forms a stable source of passive income in the residential sector, warehouse properties perform a similar function in the commercial segment, offering investors stable returns and protection against inflation.