The first Quarter of 2025 has brought new dynamics into commercial real estate investing. We are experiencing the workings of a reinstated administration moving at lightning speed, ushering in new fiscal and social policies that have rattled an already unpredictable economy. According to CBRE, total U.S. commercial real estate investment volume declined by 12% year-over-year in Q1 2025, reflecting continued caution among investors amid shifting economic conditions.
In light of this, choosing the right commercial real estate investment strategy has never been more critical. The new year presents both opportunities and uncertainties. Still, by following the framework of four proven investment strategies, investors can select the best fit that aligns with their goals and risk tolerance.
The following overview outlines and expands on these strategies and offers key insights to assist commercial real estate investors in choosing the best route forward for the balance of 2025.
4 Commercial real estate investment strategies: Examples
Understanding the four foundational CRE investment strategies—Core, Core Plus, Value-Add, and Opportunistic—provides a framework for balancing risk, return, capital involvement, and timeline. These strategies help investors and developers align investment goals with market opportunities.
Each strategy increases in complexity and potential reward, serving as benchmarks for acquisition decisions and building a resilient real estate portfolio.
Core
Definition: Core investments involve high-quality, well-located properties with stable, long-term tenants and minimal risk. These assets are typically Class A buildings in major metropolitan areas, offering reliable income with little to no need for capital improvements or hands-on management.
Examples:
- A LEED-certified office tower in downtown Boston leased to blue-chip law firms on 10+ year contracts.
- A logistics hub near Atlanta’s airport leased to a national shipping company for a 15-year lease term.
Core plus
Definition: Core plus properties share many features with core assets but come with slight operational or physical inefficiencies, such as minor vacancies, expiring leases, or cosmetic updates needed. These properties are often located in strong but secondary markets and offer potential for moderate improvement.
Examples:
- A Class B multifamily property in Phoenix with 90% occupancy and outdated interiors that could be upgraded over time.
- A retail/office mixed-use development in a high-growth suburb, needing refreshed signage and tenant repositioning.
Did you know? A study by the Joint Center for Housing Studies indicates that rental properties with significant updates can see a rent increase of up to 10% within the first year.
Value-add
Definition: Value-add properties have clear upside potential but require operational, physical, or market repositioning to realize gains. These may include deferred maintenance, below-market rents, or inefficient management, offering room for active investors to increase NOI and asset value.
Examples:
- An aging apartment complex in a Denver fringe area with significant capital expenditure and below-market rents.
- A partially vacant office building in Dallas with outdated HVAC and minimal digital infrastructure, in need of retrofit and tech tenant targeting.
Opportunistic
Definition: Opportunistic strategies focus on the highest-risk, highest-reward investments. These include ground-up development, distressed property repositioning, and entry into emerging or transitional markets. They often involve minimal or no current cash flow and rely on capital appreciation or stabilization for returns.
Examples:
- Developing a life sciences research campus from the ground up in a secondary market targeted for biotech expansion.
- Acquiring a foreclosed shopping mall in a suburban market and transforming it into a mixed-use residential and coworking hub.
The 4 investment strategy comparison summary
| Strategy | Definition | Risk | Expected Return | Ideal For |
| Core | Fully stabilized, Class A assets in top-tier markets | Low | 4–6% | Conservative or institutional investors |
| Core Plus | Slightly less stabilized; some upgrades or lease rollover needed | Low to moderate | 6–9% | Investors seeking modest upside with reliable income |
| Value-Add | Operational inefficiencies or physical improvements required | Moderate to high | 10–15% | Active investors focused on increasing value |
| Opportunistic | Ground-up development, distressed assets, or emerging market plays | High | 15%+ | Developers and private equity with higher risk tolerance |
How to choose the right commercial real estate investment strategy
Choosing an investment strategy involves aligning your financial goals, resources, and risk tolerance with market realities. Every commercial real estate strategy—Core, Core Plus, Value-Add, and Opportunistic—demands varying capital, time, and expertise levels. Grasping these factors aids in making informed decisions.
Key considerations:
- Risk tolerance:
Your comfort level with potential volatility should guide your strategy. Core investments offer stability and predictable income, while opportunistic deals carry higher risk in exchange for higher upside. - Time horizon:
Consider how long you’re willing to hold the asset. Core strategies are best suited for investors seeking long-term, income-producing properties. Opportunistic and value-add strategies often take several years to stabilize and realize returns. - Capital availability:
Some strategies require more upfront investment and greater liquidity. Value-Add and Opportunistic deals often involve renovation, repositioning, or development costs beyond the purchase price. - Market expertise:
More complex strategies demand deeper knowledge. While Core investments may be accessible to newer investors, opportunistic deals typically require experience in the development, leasing, or repositioning of assets.
Alternative commercial real estate investment approaches
The following table reflects options that appeal to investors seeking indirect exposure, passive income, or sector-specific plays.
| Approach | Definition | Why It Matters |
| REITs (Real Estate Investment Trusts) | Public or private companies that own income-producing real estate. | Offers liquidity, passive income, and portfolio diversification. |
| Private Equity Real Estate Funds | Pooled capital invested in value-add or opportunistic projects. | Access to expert management and potentially higher returns requires longer commitments. |
| Office Properties | Commercial buildings leased to business tenants. | Provides stable income through long-term leases; affected by market trends like remote work. |
| Industrial Facilities | Warehouses, logistics hubs, and manufacturing sites. | High tenant demand from
e-commerce growth, generally longer lease terms. |
| Multifamily Complexes | Apartment buildings and other multi-unit residential properties. | Steady cash flow; opportunities for upgrades and rent increases. |
| Retail Developments | Shopping centers and standalone retail. | Potential for repositioning; strong anchors improve foot traffic and revenue. |
| Special-Purpose Properties | Niche assets like data centers, self-storage, or medical offices. | Less competition and higher yield potential, require sector-specific knowledge. |
Key market factors for profitable real estate investments
While no market is risk-free, paying attention to key economic and demographic indicators can help investors identify properties with the strongest potential for long-term profitability. These factors shouldn’t be viewed as siloed, but rather as part of a larger picture when evaluating an opportunity.
Resident-to-business ratio:
A strong local workforce and business base increases demand for mixed-use, office, and retail space. Markets with a healthy balance tend to support sustainable occupancy rates.
Local purchasing power:
Higher household incomes and consumer spending levels often translate into stronger tenant performance, supporting higher lease rates and property valuations.
Demographics:
Areas with affluent, upwardly mobile populations are more likely to attract high-end residential, retail, and hospitality investments that yield premium returns.
Visibility and accessibility:
Properties with convenient access and high street visibility tend to outperform, particularly in the retail and service sectors where foot traffic and convenience drive value.
Operating expenses:
Energy costs, property taxes, insurance, and maintenance expenses can significantly impact net operating income (NOI). High-cost markets may require aggressive rent growth to maintain margins.
How to reduce commercial real estate investment risk
Even the most experienced investors know that commercial real estate comes with inherent risk, from shifting market conditions to financing challenges and tenant turnover. The key to long-term success is identifying and implementing proactive strategies to mitigate those risks early.
Explore: Commercial Real Estate Risk Management
Before acquiring any property, conduct a due diligence review. This includes examining the title history, zoning restrictions, environmental reports, property inspections, and financial statements. Investors should also review rent rolls, lease terms, and local market comparisons to validate their underwriting assumptions. Overlooking red flags at this stage can lead to costly surprises later.
Diversify investment portfolios
Diversification helps reduce exposure to any single market or asset class. Investors can cushion the impact of localized downturns or sector-specific risks by spreading investments across different regions, property types (e.g., office, industrial, multifamily), and strategies (e.g., Core, Value-Add). A well-diversified portfolio is one of the strongest defenses against volatility.
Implement effective exit strategies
Every commercial real estate investment should begin with a clear plan to exit. Whether through refinancing, selling, or recapitalizing, knowing how and when you’ll unlock value protects your capital and improves liquidity. Investors should model multiple exit scenarios under different market conditions and structure partnerships or financing terms with flexibility in mind.
How to finance commercial real estate investments
Access to the right financing can make or break a commercial real estate deal. Whether you are acquiring stabilized assets or funding a redevelopment, understanding your financing options is essential for aligning your capital strategy with investment goals. From conventional bank loans to government-backed programs and short-term bridge financing, investors have a range of tools to structure their deals effectively.
Conventional loans
Offered by banks and credit unions, these are long-term loans with competitive rates for creditworthy borrowers.
FHA loans
Primarily used for multifamily properties. Backed by HUD, these loans offer favorable terms but have strict requirements.
In addition to FHA, some states offer tax‑exempt bond financing for multifamily projects. Tax exempt bonds generally carry interest rates lower than those of taxable bonds or conventional financing, making them attractive for financing affordable and workforce housing. In exchange, they typically come with affordability restrictions that last 15 to 30 years.
Hard money loans
Short-term, high-interest loans are used for bridge financing or distressed asset acquisitions. Speed and flexibility are key advantages.
How to boost your CRE investments with technology
Technology is reshaping how investors manage, market, and maximize their commercial real estate assets. The right tools can unlock efficiencies, reduce risk, and support smarter decision-making.
Investment management software:
Specialized investment management software platforms help investors monitor asset performance, automate reporting, and manage capital relationships—all from a centralized dashboard.
AI and analytics:
Predictive tools can analyze historical and real-time data to forecast trends, identify risks, and support more accurate underwriting and asset optimization. Use caution when using AI platforms, as the information they convey may not be the most current.
Virtual tours and digital marketing:
Immersive property tours and targeted digital campaigns shorten leasing cycles, expand reach, and enhance the tenant experience before they ever step inside.
Conclusion
Investors must stay agile, informed, and strategic to remain above the fold in the rapidly changing economy going into the second quarter of 2025. By firmly planting their financial positions in one of the four core investment strategies, commercial real estate investors can unlock steady performance and sustainable growth.
Tools like Agora Real Estate Tech’s investment management program can assist you with your investment decisions, streamline investor reporting, and track performance, while offering best-in-class services in one convenient platform.
If you’re wondering if Agora is the right platform for your business, contact us to talk with our team to learn more.
