The past few years have been very challenging for commercial real estate investors. High cost of entry, rising interest rates, and a slowdown in general economic activity are to blame.
This year, however, the commercial real estate (CRE) market is recovering, though the rebound may be uneven.
According to the U.S. News & World Report, the demand for multifamily residential remains strong and unlikely to soften in 2025. Industrial properties, including warehouses and trucking terminals, will also be in demand.
The bottom line: 2025 is the ideal time to invest in CRE. However, CRE is a whole different ball game from residential properties. The stakes are higher, the deals are more complex, and the risks substantial. How do you manage them, then?
Here, we’ll share a few strategies that can help you manage risks and navigate the world of CRE like a pro.
#1 Diversify Your Portfolio—Both Sector and Geography Wise
Don’t make the mistake of pouring all your resources into that shiny office building or trendy retail space. Spread your investments across different property types.
When you hold a variety of instruments, the better performance of one investment can offset the poor performance of another, says Investopedia.
In 2023, for instance, retail properties experienced the highest capitalization rates. A higher cap rate translates to greater returns, but it also suggests a higher risk.
If you sink all your money into retail properties, you’re taking a huge gamble. What if the retail market tanks?
Diversify your portfolio instead. Consider a mix of property types—office spaces, warehouses, retail, and even multifamily housing. That way, if the retail sector takes a hit, your industrial properties might keep your cash flow steady.
Think geographically as well. Don’t just purchase property in one state or city. What if the city’s economy takes a downturn? Suddenly, you’ll face lower rents, higher vacancies, or reduced property values. But if you’ve got properties in multiple cities—or even states—you’re spreading that risk around.
#2 Research the Location Thoroughly
Your CRE property’s location is important since it can expose you to varying market risks.
Take Dallas, Texas, for example. The city has been named as the country’s no.1 CRE market for 2025.
Major industries like tech, healthcare, finance, and logistics have a strong presence, providing stability and growth potential.
Since February 2020, Dallas has seen an impressive 11.2% growth in employment. This surge not only boosts demand for office spaces, retail, and multifamily housing, but also signals long-term sustainability for investors. Hence, investing in Dallas CRE can prove fruitful.
However, the market isn’t without challenges. Foreclosures are up in CRE in Dallas. With remote work on the rise, the city has too many vacant offices. As there are not enough tenants to pay rent, owners can’t pay their mortgages. That is resulting in foreclosures.
Whether you plan to invest in Dallas or any other city, conduct thorough research on market demand in specific areas and property types. Engaging a commercial real estate professional can provide valuable insights and help you identify properties with sustainable, long-term potential, ensuring a more secure investment.
#3 Invest in Portfolio Intelligence
Commercial real estate markets shift constantly. A property that is performing well today might face challenges tomorrow. That is where portfolio intelligence can come in handy.
According to Blooma, portfolio intelligence uses real-time data monitoring and provides actionable insights. It will also offer ongoing oversight of your loan book, alerting you to any shifts that could impact your portfolio.
Investing in CRE portfolio management software with portfolio intelligence will help you stay ahead of potential risks, such as changes in interest rates, tenant defaults, or market downturns. With early warnings, you can take proactive measures—whether that is restructuring a loan, adjusting your rental strategy, or diversifying your investments.
For example, if one of your properties is consistently struggling with high vacancy rates, these tools can help you spot patterns, like competitive pricing issues in the area. That will help you adjust your strategy.
#4 Secure the Right Insurance
Don’t skimp on insurance. It’s an expense, but it’s also a non-negotiable safety net.
Beyond basic property insurance, consider coverage for liability to protect yourself if someone gets hurt on your property—slip-and-fall lawsuits can get pricey fast.
Opt for coverage for natural disasters as well. When Hurricane Helene was forecasted to strike, research revealed that approximately 162,000 CRE properties in Georgia, Florida, and South Carolina were on its path. The estimated total value of the CRE properties in the hurricane’s direct path was $425.9 billion.
Business interruption insurance is also important. If a disaster temporarily closes your property, this coverage can help replace lost rental income.
Work with an insurance broker who specializes in CRE, for they will help you customize a policy that fits your property’s unique risks.
CRE investment can offer higher returns and stable rental income. But it comes with its fair share of risks. You can, however, prepare yourself to handle whatever comes your way by following these tips.
Don’t dive head-on, however. Start small with less risky properties so that you can gain experience and confidence. As you learn the ropes, you can gradually take on larger, more ambitious projects. Keep in mind that the goal is sustainability, not overnight success.
