The economy is very strong right now, and commercial real estate investors are experiencing a lot of growth in various market segments. However, anyone who has been in this field for a decade or longer remembers all too well the downturn NY – and in fact the entire country – experienced back in 2007. While no one can make themselves completely bulletproof against downturns in the commercial real estate market, there are precautions to take to lessen the impact, and even come out on top.
If there is something that can stave off the full brunt of market downturns, it’s a long-term lease. Commercial real estate investors who focus solely on residential properties, such as homes and apartments, may take more of a hit during downturns than others. Residential tenants move on during economic downturns. Diversifying your property portfolio or bolstering the number of commercial properties can help place a buffer between your bottom line and economic trends. Business tenants are more likely to enter into and uphold long-term leases, which will at least offer a good amount of stability to your revenue no matter what the economic climate is.
Go High-End on Apartments
During economic downturns, higher-end or luxury apartments are not severely impacted. This is always subject to change, but tenants in luxury apartment building typically have job security and do not see the need to step down. If you tend to handle a more residential portfolio, consider increasing the number of luxury apartment properties to build a safeguard against future economic cycles.
Financing During Downturns
Everyone in the commercial real estate field knows the huge risks involved when funding transactions and projects out of pocket. What commercial real estate investors sometimes overlook is that the source of external funding also makes a big difference. During the last big commercial real estate downturn, traditional lending channels all but cut themselves off from any dealings in property markets to protect themselves, and claimed it was too risky. Since then, traditional lenders have been raising the requirements and making it more challenging for CRE investors to secure funding. Private lenders who deal specifically with property markets have more accessible programs without any of the red tape and faster closing times, allowing investors to acquire, renovate, and build in order to improve their portfolios and revenue.
Express Capital Financing is a leader in funding solutions for NYC property investors. If you are just getting into investment properties, or if you are looking to expand your portfolio and position yourself to safeguard against economic downturns, contact our offices today.