It has been a month since my first post, and it is interesting to note that a few of my observations have proven to be accurate. First, the larger commercial real estate corporations - that are losing money across the board - are putting their respective “houses” in order. Staff reductions combined with investor/shareholder offerings are working. Second, in New York City, an up-tick in leasing is being reported, because solid companies are beginning to take advantage of the “soft” market conditions – and so “the beat goes on………”
Commercial real estate recessions are problematic. Even when companies/people choose to “sit on their hands”, they have to move forward eventually or they will stagnate. The effects of this stagnation can be worse than the actual recession, and I always tell my clients that if they are able to take advantage of soft market conditions, they should act! Even though rates are down, adopting “a deal’s a deal” philosophy can generate cash flow and help to stimulate the local economy. For example, if a landlord commits to a lower-than-usual rate of return on a deal, there are many industries that will still benefit, i.e. contractors, subcontractors, architects, furniture salesmen, moving companies, electricians, IT companies, printing companies, etc…….
Before a commercial real estate recession can end, it must not only be impacted by those that can and do take advantage of the economic cycle, but it must also include those that understand that even a deal with a reduced rate of return is better than no deal at all……
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