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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\\u2019s overpriced, it\\u2019s outrageous. The price of land in Manhattan and those kind of things that we all hear around the country, it\\u2019s 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\\u2019s 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\\u2019t 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\\u2019ve gotten more comfortable with the higher price points myself personally. And I\\u2019m curious, as we kind of get into today\\u2019s show, I imagine cut your teeth in the New York market, and it\\u2019s a high price point market we all know that. I\\u2019m excited to kind of hear today\\u2019s 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\\u2019s 1,000,00.

Dan: Wow.

James: So yes, it is certainly expensive. When you\\u2019re 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\\u2019m talking multi-family with five or more units. I\\u2019m talking retail, office development, industrial, and there\\u2019s only about in Manhattan about five or 600 of those sales that happen a year. So there\\u2019s 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\\u2019s pretty daunting to jump in and have to put in hard money day one, really tough when you\\u2019re buyer, but when you\\u2019re looking to turn around and sell again, the market is liquid. So there are challenges to break into this, but once you\\u2019ve been able to secure an investment, if your business plan is to resell, you\\u2019re 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

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