The traditional model of investing in commercial real estate typically involved purchasing an entire property, either individually or through a partnership with other investors. However, in recent years, a new trend has emerged: fractional ownership. This model allows multiple investors to own a share of a commercial property, and is becoming increasingly popular in the real estate market. Let’s explore this growing trend and its impact on the industry.

Fact and Data Publish:

1. The fractional ownership market for commercial real estate is expected to grow significantly in the coming years. A recent report by Allied Market Research predicts that the global fractional ownership market for commercial real estate will reach $1.7 trillion by 2026, representing a CAGR of 7.8% from 2019 to 2026.

2. Deloitte’s 2021 Commercial Real Estate Outlook report found that real estate investors are increasingly interested in fractional ownership as a way to gain exposure to different markets and asset types. Deloitte predicts that the global market for fractional ownership of commercial real estate will reach $4.8 trillion by 2025, representing an annual growth rate of 26.7%. The report also notes that the COVID-19 pandemic has accelerated the adoption of technology in the industry, making it easier for investors to participate in fractional ownership opportunities.

3. Commercial fractional ownership can provide investors with several benefits, such as diversification of their investment portfolio, access to larger, higher-quality properties, and lower transaction costs compared to direct ownership.

4. The number of real estate crowdfunding platforms has increased from just two in 2011 to over 200 in 2021, making it easier for investors to participate in fractional ownership opportunities.

5. The average investment size for commercial fractional ownership has decreased in recent years, making it more accessible to a wider range of investors. According to a report by the National Association of Realtors, the average commercial real estate crowdfunding investment was $5,000 in 2018, down from $10,000 in 2017.

6. Commercial fractional ownership is gaining popularity among smaller investors who may not have the resources to invest in large properties on their own. This can help democratize access to commercial real estate investments.

Advancements in technology have played a significant role in driving the growth of commercial fractional ownership. Online platforms and investment marketplaces have made it simpler for investors to connect with property owners and operators, and to access a wider range of investment opportunities. Additionally, changes in the broader economy have made commercial real estate an attractive option for investors seeking alternative investments to traditional stocks and bonds.

One of the key benefits of commercial fractional ownership is that it can provide access to a wider range of investment opportunities. Smaller investors who may not have the resources to invest in large properties on their own can now participate in larger, higher-quality properties. This can help democratize access to commercial real estate investments and provide investors with a more diversified portfolio.

Fractional ownership can also provide benefits to property owners and tenants. Property owners can use fractional ownership to raise capital and gain access to a wider pool of investors. Tenants, meanwhile, can benefit from more flexible lease arrangements and access to shared amenities and services.

While the trend towards commercial fractional ownership is a positive development for the real estate industry, investors need to be aware of the potential downsides. Potential disagreements among co-owners over property management and decision-making can be a challenge, and investors need to carefully consider these factors before making an investment.

In conclusion, the trend towards commercial fractional ownership is a growing and exciting development in the real estate market. As the market continues to grow, we can expect to see more innovation in the industry, including new investment models.