Rising Interest Rates and Commercial Real Estate
With interest rates expected to rise, how does it directly impact commercial real estate? If you are a property owner how should you prepare? As an investor, what advice should you follow?
While interest rates are important to monitor, there is no need to hit the panic button if we witness an increase. Chuck Heller, Associate Broker with Landmark Commercial Realty says, “While we may see an increase, interest rates are still relatively low. Consumer confidence is at an all-time high since coming out of the Great Recession of 2008.”
While consumer confidence is steady, Heller believes, we should be always be prepared for the possibility of a downturn since, historically, this the longest we have gone without one. Heller adds, “Always plan for the worst, but hope for the best. Right now, the economy is strong, but looking into the future and having a plan B and sometimes C, is important in commercial real estate. Being prepared is crucial for success.”
Heller suggests when interest rates rise, you should consider selling before they climb. He adds, “Commercial real estate is cash flow driven so if interest rates are continually rising, people won’t spend as much. But again, what goes up, must come down so think strategically and plan accordingly.” Heller believes if selling doesn’t make sense right now, then it may not be the right time.
“If you are an investor or a business owner looking to purchase a commercial property, do your homework and research sooner rather than later,” Heller recommends. “Don’t feel forced or pressured into a major purchasing decision. Plan ahead and think long term. It is best to look into the future and determine where you want to be. If you come across a great deal you should definitely buy. Refinancing sometime down the road when rates do decrease is always an option.”
In summary, it is best to be prepared and plan ahead if you are an owner or an investor. A few percentage points actually makes a big difference however changes that dramatic aren’t realistic. And remember, what goes up, must come down.
Let Landmark Commercial Real Estate navigate you through the ups and downs, and twists and turns. We provide sound, honest advice and guidance, answer your questions and always have your best interest in mind.
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