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Handling risky commercial real estate markets

On Behalf of | Mar 19, 2019 | Commercial Real Estate

Investors in Texas who have commercial real estate assets or who are considering investing in commercial real estate may be interested to know how to successfully navigate in an uncertain market. There are many factors that can create anxiety and uncertainty in the commercial real estate industry. However, taking certain steps to remain agile enough to respond quickly to unexpected changes can help investors avoid being left behind.

One important step investors can make is to take a critical look at their mixture of tenants. Commercial leases that range from 10 to 15 years are no longer the norm. Corporations now favor short-term leases due to the uncertainties that can arise in the business market. Commercial real estate investors should respond in kind and revamp their long-term business models by focusing on short-term leases. While the short-term leases may change real estate valuation and financial forecasting, investors will experience an instant rise in their net operating income, which will compensate for any of the risk associated with having vacant space.

Cultivating relationships is another factor in investing successfully in a risky commercial real estate market, as it can help to establish future stability. When the market is in a growth cycle, there will be a surplus of capital. However, when the growth begins to slow and then stops, capital will be necessary for investors to remain solvent during the downturn.

For capital relationships that already exist, maintaining constant contact is important while the market expands. Investors should also try to anticipate how banks will weather the economic changes while keeping a close eye on how it will affect business.

A commercial real estate attorney may assist investors with securing commercial properties. The attorney might protect the rights of clients during commercial real estate transactions and during disputes regarding commercial leases or management agreements.


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