What are the best states to invest in Commercial Real Estate? The answers may surprise you. Commercial real estate has always been a lucrative investment opportunity, and with the growth of the U.S. economy in recent years, it’s never been a better time to invest. The United States is a vast country with varying economic conditions, and some states are more conducive to commercial real estate investments than others. In this article, we’ll take a look at the top 10 states to invest in commercial real estate. While there are certainly other states that may be attractive destinations for commercial real estate investment, these ten states are frequently cited as being among the most favorable for investors.
Top 10 States to Invest in Commercial Real Estate
(1) Texas
Texas is the largest state in the continental U.S. and has a booming economy. With low tax rates and business-friendly policies, Texas has been a top destination for companies and entrepreneurs for years. Major cities like Houston, Dallas, and Austin are thriving with job growth, which has increased the demand for commercial real estate. Retail, industrial, and office properties are in high demand, making Texas an ideal state for commercial real estate investment.
(2) Florida
Florida has a rapidly growing population and a strong tourism industry, making it an excellent state for commercial real estate investment. The state has a diversified economy, with industries such as healthcare, technology, and finance contributing to job growth. Florida’s commercial real estate market is strong, with a high demand for office, retail, and industrial properties. In addition, Florida’s warm climate and beaches make it an attractive location for businesses and investors.
(3) New York
New York is one of the largest and most diverse commercial real estate markets in the world. The state’s economy is driven by a mix of industries, including finance, technology, media, and real estate. The New York City area is one of the most important commercial real estate markets globally, with strong demand for retail, and industrial properties. Whilst Office vacancies have been on the rise due to the “work from home” concept , this provides a great opportunity for investors to pick up value add properties and/or re-purpose these properties. While the market is highly competitive, there are many opportunities for savvy investors to profit in this high-growth environment.
(4) California
California has a robust economy, driven by the entertainment, technology, and healthcare industries. Silicon Valley is home to some of the largest technology companies in the world, driving demand for office and industrial properties. Additionally, California’s proximity to Asia and its large population make it an attractive destination for international investors. The state’s high population and wealth make it an excellent market for retail and mixed-use properties as well.
(5) Georgia
Georgia has a strong economy and is home to many Fortune 500 companies, including Coca-Cola and Delta Air Lines. The state’s real estate market is thriving, with demand for office, industrial, and retail properties. Georgia’s low cost of living and business-friendly environment make it an attractive destination for businesses and investors.
(6) North Carolina
North Carolina has a diversified economy, with industries such as biotechnology, finance, and energy driving job growth. The state’s major cities, including Charlotte and Raleigh, have growing commercial real estate markets, with demand for office, industrial, and retail properties. Additionally, North Carolina’s universities and research centers make it an excellent market for medical and research-related properties.
(7) Illinois
Illinois is home to Chicago, one of the largest and most important commercial real estate markets in the United States. The state’s economy is driven by industries such as finance, manufacturing, and healthcare. The demand for office and retail properties in Chicago is high, with many opportunities for investors to profit in this competitive market.
(8) Colorado
Colorado’s economy is diverse, with industries such as aerospace, technology, and renewable energy driving growth. The state’s major cities, including Denver and Boulder, have growing commercial real estate markets, with demand for office, industrial, and retail properties. Additionally, Colorado’s scenic beauty and outdoor recreation opportunities make it an attractive destination for businesses and investors. Arizona
(9) Arizona
Arizona’s economy is driven by industries such as healthcare, technology, and aerospace. The state’s population is growing rapidly, creating strong demand for commercial real estate. Arizona has a total of 154 companies on the Inc. 5000 list, 37 more than the previous year. Arizona’s Business Growth, The Best Investment Opportunity
(10) Tennessee:
Tennessee is known for its business-friendly environment and low tax rates, making it an attractive destination for commercial real estate investors. The state has no personal income tax, and the corporate income tax rate is just 6.5%. Property taxes are also relatively low, and the state offers tax incentives for businesses in certain industries, such as manufacturing and research and development.
States to Invest in Commercial Real Estate (Tax Advantages)
Each state has its own tax laws, which can affect the tax advantages of investing in commercial real estate. Here is a brief comparison of the tax advantages of the top 10 states for commercial real estate investment:
- Texas: Texas has no state income tax, making it an attractive destination for investors looking to minimize their tax burden. The state also has low property taxes and sales taxes.
- Florida: Florida has no state income tax, making it an excellent destination for investors looking to minimize their tax burden. The state also has a low corporate income tax rate of 5.5%.
- New York: New York has high income and property taxes, making it less attractive from a tax perspective. However, the state does offer tax incentives for certain industries, such as film production and technology.
- California: California has a high-income tax rate, with a top marginal rate of 13.3%. The state also has high property taxes and sales taxes.
- Georgia: Georgia has a flat income tax rate of 5.75%, which is relatively low compared to other states. The state also has low property taxes.
- North Carolina: North Carolina has a flat income tax rate of 5.25%, which is relatively low compared to other states. The state also has low property taxes.
- Illinois: Illinois has a flat income tax rate of 4.95%, which is relatively low compared to other states. However, the state has high property taxes.
- Colorado: Colorado has a flat income tax rate of 4.63%, which is relatively low compared to other states. The state also has low property taxes.
- Arizona: Arizona has a flat income tax rate of 4.5%, which is relatively low compared to other states. The state also has low property taxes.
- Tennessee: offers a favorable tax environment for commercial real estate investors, with low tax rates and tax incentives available for certain types of businesses. Additionally, the state has a growing economy and a robust real estate market, making it an attractive destination for investors seeking long-term growth potential. Tennessee has a tax on certain types of income, but it does not have a broad-based personal income tax. Tennessee does not tax wage income, but it does tax certain types of investment income such as interest and dividends.
Overall, states with no state income tax, such as Texas and Florida, offer the most significant tax advantages for commercial real estate investors.. States with low income and property taxes, such as Georgia, North Carolina, and Colorado, are also attractive destinations for investors looking to minimize their tax burden. However, states with high income and property taxes, such as New York and California, may not be as attractive from a tax perspective. It’s essential to consult with a tax professional before investing in commercial real estate to ensure you’re aware of all tax implications.
The tax laws of each state are continually evolving and changing. State tax laws can change for a variety of reasons, including changes in political leadership, economic conditions, and legal decisions. For example, a state legislature may decide to increase or decrease income tax rates to address budget shortfalls or to attract businesses to the state. Similarly, a court ruling may impact the tax treatment of certain types of commercial real estate investments, such as how depreciation is calculated or whether certain expenses can be deducted.
Because tax laws can change frequently, it’s important for investors to stay up-to-date on any changes that may impact their investments. This may involve working closely with a tax professional or financial advisor who can provide guidance on how to navigate changing tax laws and maximize tax advantages.
In addition to changes in state tax laws, federal tax laws can also impact the tax advantages of investing in commercial real estate. For example, the Tax Cuts and Jobs Act (TCJA) of 2017 introduced significant changes to the federal tax code, including changes to the treatment of pass-through businesses, bonus depreciation, and the like-kind exchange rules. These changes may have a significant impact on the tax implications of commercial real estate investments and may influence investment decisions.
In summary, tax laws are constantly evolving and changing, and the tax advantages of investing in commercial real estate can be impacted by these changes. It’s important for investors to stay up-to-date on any changes to state or federal tax laws that may impact their investments and to work closely with tax professionals or financial advisors to maximize their tax advantages.
If you are interested in learning more about the commercial real estate market in Phoenix or other markets, feel free to reach out to us at ICRE Investment Team anytime. We’d be happy to help supply you with the information on any relevant properties or markets, alongside any connections in lending, investing, brokerage service or consulting that you might need!
