JP Morgan’s midyear commercial real estate outlook for 2023 reflects uncertainty since the future of office space has come into question. While office space is a big factor for many investors, it doesn’t make up all commercial real estate, and the industry is showing itself to be resilient, overall. The current market is a good reminder that there are other sectors uninhibited by office space fluctuations. Some of these include multifamily, industrial, and retail. Wireless towers are another lucrative option, and there are also RV parks and campgrounds to consider.
While COVID impacted the office space sector negatively, it had an unexpected effect on RV sales. The uptick in remote work allowed for more people to travel while working, and RV sellers experienced record-breaking sales throughout the pandemic. This, in turn, benefitted RV park and campgrounds and their investors, when customer reservations surged over 500% in some locations.
Keep in mind, this was an all-time high, record-breaking experience, so it is not likely to see it hold true year over year. These record-breaking numbers from 2021 haven’t been carried into 2023, and numbers are down about 15-20% from that high, currently. Other factors are at play, such as interest rates, the price of gas, and the cost of utilities (such as electricity and water) for the RV parks and campgrounds that must absorb them. As with any portfolio, it’s important to look at valuations over a 5–10-year window to get a good idea of the worth of your investment. Even so, most RV parks and campgrounds are still up 60-80% in value since 2018, which is a good sign for investors.
There are as many RV parks and campgrounds buyers as ever, and that’s showing no sign of slowing down anytime soon. Higher interest rates and inflation are making buyers more selective, but they aren’t hindered. Families and small investors are showing the most interest in these property types, as opposed to large capital groups, possibly because they’re more interested in keeping their properties long-term. The idea is to buy now with a strong down payment and refinance when interest rates drop. In effect, RV parks and campgrounds, like Kampgrounds of America (KOA) have reported a high level of investment in both existing and new campgrounds, and continue to develop new campgrounds, and update existing sites to keep up with demand.
In a tumultuous market, with high interest rates and inflation, some areas of the commercial real estate industry show more promise than others, and RV parks and campgrounds are showing signs of growth despite higher costs. This could be a profitable investment for those looking to diversify and move away from office spaces. Simply remember to keep 5-10-year valuations in mind when a high record for reservations returns to the mean.
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