Making Effective Decisions in a Challenging Market

By Tripp Hardin, SIOR
Senior Vice President, CB Richard Ellis

As the national economy’s tailspin and the associated credit crunch begin to slow down the St. Louis commercial real estate market, it’s important to remember that the last thing you want to do as a lending institution, property owner or tenant is to assume that you will be immune from the forces at hand.

In these times, more than ever, it’s important to discuss your options with a real estate professional. Down economic times can present great opportunities, whether it’s taking advantage of lower prices to buy your own building or revisiting your lease to see what changes can be made to save you and your company money.

If you’re a tenant, ask your broker to take a look at your existing lease. Often, in a slowing economy, building owners will be willing to offer an early renewal or a short-term lease extension at competitive rates in order to keep their building as full as possible. With fewer companies expanding or moving into the market, building owners need to be proactive, which can result in more aggressive lease terms and conditions. Renegotiating your lease now could lead to significant cost savings in the future.

If you own real estate, a challenging market is a good time to evaluate your assets, including your loan terms, operating expenses and your tenants’ credit profiles. If you’re a user/owner, will an economic turnaround bring expansion and a need for more space? If so, perhaps it’s the right time to look at expansion options or even a larger building while prices are competitive. If you own investment properties, aggressive measures like cost segregation and lease restructuring may help stabilize your properties and keep your cash flow positive.

For banks and commercial lenders who are really feeling the effects of a stressed out market, some real estate firms have well-established programs specifically designed to help you. CB Richard Ellis’ Restructuring Services Group, for example, offers help with recapitalization, distressed loan sales, asset and portfolio valuation, asset enhancement and repositioning, along with appraisal and valuation services.

We all hope the commercial real estate industry and the economy will turn around sooner rather than later. But even in a slow market, it’s important to keep a close eye on your real estate needs and be in constant communication with your real estate advisor.

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