Fractional ownership in real estate is not new—even in the earlier generations, a group of people with somewhat similar financial investment goals would co-own a property. They would agree to share the risk if any, and divide the returns on the investment.
In commercial real estate (CRE), fractional ownership is gaining popularity among the millennials as a relatively safe and lucrative investment option. As this Financial Express story (source) says, fractional investment options mean that the commercial real estate investments are not really the privilege of the rich and wealthy only. Some of the factors that have contributed to the rise in this kind of investment model are:
- Millennials are educated and they have access to technology. The rise of PropTech gives them access to variety of tools in property management, real estate listings and comparison. They are more informed and are more sure of the risks involved in the investment.
- They are more connected on social media. It means that they can join the right communities to interact with the people with shared interests. They see and discuss the success stories and learn from the experiences where it worked for others. It gives them more confidence to plan fractional ownership of a commercial property.
- They are young and they have age on their side. So, they can afford to play a long and waiting game. Longer contract length with tenants means higher chances of a better ROI on their property.