Staying Resilient in a Commercial Real Estate Market Downturn

The economic shocks have gradually been catching up with?the Real Estate market, hence pushing it to the brink of its downturn. However, it is necessary to be strategic in the face of the uncertainty, to avoid bearing the brunt of it.

How can one stay resilient and steady on a shaky ground? Let’s discuss!

1. Preserve Liquidity:?Investors may want to prioritize conserving liquidity, especially if there are indicators of an imminent recession. This requires being patient and disciplined when examining new investing prospects, rather than jumping into transactions just for the sake of activity. This will enable investors to have capital available for strategic investments when the recession hits.

?2. Hold off on big projects:?Avoid committing to large-scale initiatives that will need a considerable monetary commitment. When banks stop lending and owners have difficulties refinancing looming obligations, it's best to avoid projects that require to be worked on, from scratch, to prevent risk. Delivering a significant project during a crisis can be negative.

?3. Recession proof asset types:?During recessions, some commercial real estate asset types show better resilience, such as self-storage facilities, medical office buildings, mobile home parks, and suburban multi-tenant offices. These properties often retain constant performance throughout economic downturns, owing to variables such as continuous demand and limited supply.

?4. Lock in long-term debt: One successful technique for mitigating the risks associated with interest rates and debt maturity is to get long-term, fixed-rate loans. For investors anticipating a recession, fixed-rate loans with 7–10-year periods may be appropriate. A timeline like that gives resilience during a recession, protecting against concerns about debt maturity and positioned one favorably when the economy recovers.

5. Invest strategically post-recession: Seek out opportunities to invest in transactions at lower bases throughout the recovery period. Embracing this strategy approach has the potential to accelerate portfolio expansion while also creating potential for long-term success.