It’s no secret that the commercial real estate market has seen its fair share of fluctuations in the past several years. But there have been a few surprising developments recently that indicate the market is poised for a comeback. We’ve seen growth in short-term commercial rentals, like pop-up stores, coworking spaces, and event venues.
We’ve also seen rising investor interest in diversifying into this niche. For instance, the commercial real estate firm CBRE announced in January that they were acquiring coworking company Industrious in a deal valued at $800 million. Let’s take a closer look at emerging short-term commercial rental opportunities and how investment management software can streamline processes and maximize returns in this space.
Understanding the Pros and Cons of Short-Term Commercial Rentals
Short-term rentals can offer benefits to both property owners and tenants. For tenants, there are shorter lease commitments, which, in turn, allows landlords to use flexible lease terms and conditions to account for changing markets or property strategies.
This niche market often lends itself to tenants like seasonal retailers, pop-up stores, and the newly popular coworking spaces. Landlords can utilize vacant spaces and generate revenue, while tenants gain access to spaces for limited periods for events, product launches, or initial business phases. All of this points to opportunities to charge a premium in exchange for flexibility.
While commercial properties represent a dynamic and adaptable investment strategy, with the potential for higher rents, there is a downside. Property owners need to navigate more complex leasing terms and more risk due to higher turnover and unpredictable income streams.
Yet, in today’s volatile market, diversifying a commercial real estate portfolio by including short-term commercial rentals can certainly be worth it. Property owners can spread that risk and capture the financial reward of higher cash flow and lower vacancy rates.
That said, managing the downsides is easier with the right investment management tools.
How Investment Management Software Helps GPs Capture the Upsides of Short-Term Commercial Rentals
Traditional spreadsheets and basic property management tools won’t be enough to manage the complexity of short-term commercial rentals. A holistic investment management platform will give GPs insight into centralized data and real-time analytics to inform CRE operations.
In addition to forecasting trends, the right investment management software will help GPs manage their assets and simplify operations. GPs should look for a few core capabilities that align with the needs of short-term commercial rentals:
- Real-time financial tracking
- Dynamic pricing analysis
- Automated lease management
- Maintenance and operations tracking
- Portfolio-level insights
Innovative automation features will simplify and customize performance reporting while also boosting transparency and trust with investors, who can monitor financial performance and market trends. GPs can streamline stakeholder engagement with performance reports, shared dashboards, and data-driven updates that foster communication between investors and partners.
Unpredictable income streams common in short-term commercial rentals are instantly manageable with a platform that offers demand forecasting, occupancy trends, and revenue per square foot — all in one place. GPs improve decision-making with data analytics and boost operational efficiency by gaining faster turnover management and automating invoicing and renewals.
The right investment management platform will track tenant performance and payment history — a crucial feature to mitigate risk in the short-term commercial rental market. GPs can also easily manage multiple properties across different locations with consistency.
What to Look For in an Investment Management Platform
A one-size-fits-all platform won’t be able to manage it all — from new deals to investor distributions and everything in between. Covercy’s customizable dashboard and reporting simplify communication so GPs can take advantage of what would otherwise be a complex and unpredictable market opportunity.
With support for compliance and legal documentation, as well as AI-powered analytics for revenue optimization, Covercy’s investor management tools and features handle details like rent and market updates for investors, so GPs and LPs are always on the same page. And today’s investor management tools wouldn’t be complete without mobile accessibility for on-the-go property managers.
Covercy’s investor portal also offers integrated banking services so GPs and LPs can transfer funds instantly; hold committed capital in FDIC-insured, interest-bearing accounts; and maintain an auto-reconciled transaction history for easier audits and accounting.
Find out more about how Covercy makes it easier to capture opportunities in unpredictable markets — like short-term commercials rentals — and book a demo today!