These tips can help investors and owners shape up to face the unpredictable future.
Commercial real estate has experienced a dynamic market
shift during the past five years that has affected nearly every aspect of the
industry. As the slow economic recovery remains fragile, many commercial
property owners and investors wonder if they can
survive the still-shaky market. The answer is yes, they can.
The solutions for the future are rooted in back-to-basics
fundamentals. The following survival tips equip commercial property owners and
investors with strategies to successfully navigate the unpredictable market
conditions that lie ahead.
Preparation is the first and most important step to
surviving a severe financial downturn. This step is especially critical in
commercial real estate, since the industry is affected by so many variables
that are outside of property owners’ and investors’ control.
A key preparation strategy is to monitor the capital markets
and fluctuations in financing availability and industry trends. Keeping a
watchful eye on emerging patterns can help owners and investors better
understand real estate cycles and steer clear of danger.
In addition to analyzing industry trends, it is essential to
keep track of the U.S. and global economies. With potential policy changes
looming ahead after the upcoming presidential election, U.S. business owners
should evaluate their current strategies and assess how they may be impacted by
legislative modifications and the resulting global trends.
Know Your Clients
Clients can be a good barometer for what is coming next in
the industry. An in-depth understanding of the financial markets and U.S.
global economies can help companies better serve their clients as the industry
shifts and changes. By understanding and monitoring lenders and industry
niches, companies will be better prepared to change gears, secure different
types of lending sources, and adapt to lenders who will provide the best
financing programs for their clients’ projects.
For example, after the savings and loan crisis in the 1990s,
savings and loan entities disappeared, leaving a major shortage in commercial
capital availability. At the time, George Smith Partners recognized that it
needed to change its focus from savings and loans to the emerging Wall Street
conduits and commercial mortgage-backed securities market. As one of the first
companies in the industry to arrange CMBS financing, GSP built strong
relationships with these new capital sources, many of which have become
long-standing business relationships.
Communication Is Key
Technology evolves almost as quickly as the markets change.
Commercial property owners and investors must harness new technologies and stay
connected with clients, lenders, and other allied professionals. Ongoing
communication and use of the latest technology is vital to retaining growth during
a recession, as well as for staying at the forefront of the changing market.
For instance, in an effort to better market its services to
clients and capital providers, GSP created a weekly faxed newsletter focused on
insights into critical and relevant issues affecting the commercial real estate
and financial industries. Over the years the subscriber base has grown; the
newsletter is no longer faxed but now emailed to more than 100,000 recipients
each week and has become a resourceful, invaluable tool for clients and
Company leaders must identify the communication tools that
best suit their industry niche and client base. For some, the ongoing
conversation and visibility of social networking sites such as Facebook,
LinkedIn, and Twitter can be far more beneficial to business development than
more-traditional forms of communication. However, companies must strike a
balance between traditional marketing and current communications techniques to
Watch the Road Ahead
Predicting future market cycles is a difficult task, with
unexpected sea changes in the capital markets as well as the macro and micro
economies that affect real estate. Yet it is imperative to focus on the road
ahead and try to look around corners to anticipate what is next.
In the short term, November’s U.S. presidential election is
likely to have an impact on the economy, employment, regulation and taxes, and
the fiscal markets, all of which impact commercial real estate. In addition,
Europe’s financial crisis will continue to have domestic economic
In the long term, the
future of commercial real estate largely depends upon the economy and job
creation over the next decade. There are some promising indicators that the
economic train is on the right track: Capital markets have become more
aggressive, and lenders and equity sources are actively seeking solid
commercial real estate assets to finance. However, the economic recovery
remains susceptible to many global and domestic factors that are rapidly
As property owners and investors look ahead, it’s wise to
take lessons learned in the recent past and use them to strategize for the
future. With the right strategies and tools, property owners can prepare
themselves for whatever the market may hold in the years ahead.
M. Tenzer is principal and managing director of George Smith
Partners, a national real estate investment banking firm celebrating its 20th
anniversary. Contact him at email@example.com.