By Mark Hinkins , CCIM , FRICS
READY YOUR BUSINESS FOR RECESSION
While the market is unpredictable , preparations can and should be made for difficult economic times .
Recessions always seem to catch people by surprise — even though lots of supporting evidence indicates they ’ re forming and proves they ’ re cyclical . This time around , with the pandemic ’ s work-fromhome routine adopted by many companies , commercial real estate is being deeply tested .
The post-COVID-19 recession may already be here , though it may only become more clearly visible by the middle of next year . Commercial real estate values will start falling as liquidity goes out of the market . In preparation , brokers and agents must adapt their business today , so they can stay profitable during the next 18 to 36 months . Here are seven time-tested approaches for recession-proofing your real estate business and a glimpse into the future of our industry .
PICK A WINNING SIDE Any real estate market contains these four pillars : sellers , buyers , tenants , and landlords . You ’ re trained to think how to represent one
Having something to refinance is better than having nothing — and it ’ s better to have a tenant to renegotiate with later than having empty space . of these factions as best you can , but during economic downturns , it ’ s a matter of who you represent , because knowing which side to represent amid changing market conditions is how the agile brokerage adapts , follows the money , survives , and flourishes .
If you represent sellers , show them how commercial real estate values historically dropped following stock market corrections . If it ’ s buyers , shift their mindset to see a recession as a friend — an opportunity , as growth happens , paradoxically , when buying and not selling . If it ’ s tenants , assess the impact of the lease based on your clients ’ expenses and work policies . Finally , if it ’ s landlords , take stock of their expenses and exposure to lease defaults .
If you ’ re a real estate investor , stock up on cash and be prepared to buy . It ’ s true that prime rates aren ’ t favorable right now , due to the federal government ’ s desire to combat a 40-year high in inflation . But remember that you can always renegotiate and refinance
Photo by Michael H
30 COMMERCIAL INVESTMENT REAL ESTATE MAGAZINE FALL 2022