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Overbuilding concerns in some CRE sectors

Construction of commercial real estate in California can be a good thing when there is a lot of demand for new units. However, too much building in a particular real estate sector can lead to oversupply. When a commercial real estate sector has more empty units than it has willing buyers and renters, the situation can be bad for the whole sector.

Right now, there are some concerns about overbuilding of apartments. New construction of apartments has been increasing steadily for many years, though demand has continued to be strong. After years of heavy apartment construction, real estate analysts are now noticing that there is an excess supply of units in some areas, especially in high-priced markets.

Though there has been a lot of talk about the failing retail sector lately, overbuilding does not seem to be a problem there. Store closures and a lack of demand for new retail space are issues, but retail occupancy rates have improved this year. In the industrial sector, demand is still outpacing supply, and overbuilding is not a problem. Some analysts have reported that industrial properties in both the United States and Europe are experiencing all-time low vacancy rates.

Purchasing commercial real estate properties for investment purposes can be a complicated process for people who are not familiar with these types of transactions. It may be wise for an investor to consult an attorney before going forward with a purchase of commercial real estate. An attorney can be of assistance in the resulting contract negotiations and in spotting any provisions that could prove to be troublesome.

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