Commercial real estate, traditionally a reliable haven for small investors, has shown its dark side in the last year.
Real estate values have come down from their peak around 2006 and operating costs have frequently increased as tenants of such properties as apartment buildings, stores and warehouses have moved out or fallen behind on their rent.
Selling property has also been a challenge because some would-be buyers have trouble getting loans and others are waiting to see whether prices will fall further before they'll consider making a purchase.
But with the market unsettled, opportunities are popping up for small investors with the nerve to take some risk, industry observers said.
You may think that investing in commercial real estate is just for the wealthy. But if you can afford to buy a house, you can afford commercial real estate. A recent cruise through Southern California listings showed a San Bernardino structure previously used for auto repair selling for $149,000, and a duplex in Hollywood for $550,000. Of course, prices can also be much higher.
Investors should bear in mind, though, that being a landlord during a recession can be a trial.
The time-honored appeal of commercial property -- that it can provide owners with steady income from rents -- is being tested as economically stressed tenants pay rent late or come up short.
"Renters are paying a little less and paying a little slow," apartment owner Jeff Serber said.
He estimates that the prices he can charge for units in his buildings in Hollywood and West Hollywood are down about 15% from a year ago.
A lot of small retailers are struggling too, said landlord Louise Dedeyne, president of the Studio City Shopping Center Assn. She is giving her half a dozen tenants on Ventura Boulevard a break by absorbing more than 35% of overhead expenses, such as parking lot security, that she could legally pass along to them.
"I wish I could give them more," she said of her tenants. "I just can't afford to give them a better break."
Empty storefronts not only don't generate rent but also are a drag on surviving businesses because they don't generate foot traffic and can make the neighborhood depressing. Still, Dedeyne endeavors to keep her standards up, declining to rent to retailers that she thinks don't fit the mix of her center
"I've had prospective tenants offering everything from cannabis to mopeds," she said.
