Where is this economy headed? What are the concerns coming our way that are right now on the horizon? How can we protect ourselves from what all of these forecasters are now telling us?
The good news is that we’ve made it through the last economic downturn, which was the worst one we’ve ever had since The Great Depression. So whatever will be coming our way in the near future will probably be better.
Economists are telling us that there may be gloom on the horizon. Other economists are telling us that things may really be OK…and that they may even be good! Which can remind us of what President Harry Truman was reported to have said…
When the President was getting tired of hearing economists say things like, “On the one hand, we could be in for some tough economic times. But on the other hand, things could be OK,” the President reportedly said something similar to, “What this country needs is a good one-handed economist!”
It’s difficult to know with certainty where this economy is headed, and we can definitely find economists who will give us different points of view on this. The key, though, for you personally, is how well are you situated with your real estate right now to handle future economic conditions?
The lessons that can be learned from the last economic downturn include “Don’t get over-leveraged on your real estate”, and “Don’t sign leases with tenants who might not survive tough economic times”. In its simplest form, this can be a good philosophy to withstand any economic downturn when it comes your way in commercial real estate.
It can be tempting sometimes for people to leverage their property to the hilt to buy other properties when the market is hot, and when property values are solidly appreciating. But we know that real estate markets come and go in cycles, and we need to be prepared for that time when the market finally turns once again. One of the greatest illusions that hits people in good economic times is the idea that this good economy will continue on forever, and that just isn’t the case. The good news is that many economists aren’t concerned that a major economic downturn is headed our way right now, and this is great news to be hearing from them.
So if you own commercial real estate, how are you now situated with it? Do you have the right tenants in place that you believe will withstand any economic storm?
With the way that the business world is rapidly changing, do you own properties that would be ideal to exchange out of right now, and exchange into other properties that will be better situated to be in high demand in the future? Buildings that are now in the process of becoming functionally obsolete, and buildings that are in locations that are becoming less desirable, may not be the best choices for you to continue owning in the future. With this in mind it will be wise for you to understand this and consider trading out of these buildings before everybody else begins recognizing this also.
We live in a business climate now where it’s not only important to understand the timing of the economic cycles, it’s also important to understand where the desirability of your property will be headed in the future.
If you’d ever like to discuss this and how it may impact any property that you own, give me a call.