What do you do if your commercial real estate market suddenly shifts?

This too general of a question. What kind of shift? Rates, values, inventory or bad rental market. Without knowing which, it can't be avaluated.

Your underwriting should have a sensitivity analysis! Check your model first to see if you are still in the green, or trending into yellow/red. The first step is to asses your current portfolio and protect your current investors.

Understanding how the sudden shift impacts each of your customers (or assets) uniquely and individually is critical to weathering any storm in CRE. Taking a look at ownership structures, contract “triggers” that may apply, collections from tenants during that time (or lack thereof)…all necessary steps to really understanding the situation and implications for your portfolio. When there is a sudden change, I think it’s important to do the above in order to be very clear and cognizant of one’s situation and the gravity of what’s going on; combining this with traditional underwriting fundamentals and a long term view should allow one to navigate the current circumstances as effectively as possible. Good luck!

Assess market impact with accurate data. Review contracts for risks. Adapt strategy and communicate with stakeholders. Stay agile to navigate shifts effectively and emerge stronger.

Assess your acquisition strategy. Look at the debt structure, reopen dialog with your vendors (tax, insurance, property management, loan officer) and then reassess your assumptions. Is the deal still realistic, do they agree or disagree and why. If the deal is no longer sound, you may need to re-trade.

I see it this way ; 1. Transparency builds trust and credibility. 2. Actively listen to stakeholders' concerns and feedback. 3. Address concerns promptly and professionally. 4. Foster collaboration and cooperation among stakeholders. 5. Maintain regular communication for transparency and confidence.

And to adjust your strategy, you must be open and flexible because to deal with change, you must change. Explore options, keep an open mind, and try new approaches, methods, and solutions. For example, if we look at the current shift in the market, it is not only the sectors and properties' performance that are being affected but also the lending conditions in the market. So, maybe in the past, you hadn’t considered alternative financing options because you didn’t need it, but now it might be your best strategy. Reevaluate and adapt.

The bank is the biggest partner in the deal, start with them and the structure of the debt. This is going to be the biggest impact to the returns. You may need to adjust equity structure too based on current risk free rates.

Adjust strategy to align with market reality. Rethink goals, prioritize value creation. Revise pricing, explore new opportunities. Embrace innovation, diversify portfolio. Monitor and iterate for ongoing adaptation and success.

After a long career through upturns and down turns in market conditions the key for me is to build long term relationships with you core clients and be able to advise on all aspects of their property needs. Even when things are tough there will be rent reviews lease renewals break clauses valuations dilapidation claims etc to deal with apart from transactional business.

Seek professional advice for market shift. Consult experts, network with peers. Gain insights, guidance, and support. Stay informed, proactive, and adaptable for success in commercial real estate.

LinkedIn is a great source to connect with other groups and ask what they are underwriting to. In addition, a top broker at leading firms are a great source of knowledge and can shed light onto what other groups are doing to navigate the market turns.

Investing in technology is moving along with the shift, as these trends heavily influence the market. Smart building features, for instance, are an answer to the increasing need for sustainability, with automatic lighting and temperature settings. Predictive models provide more detailed and extensive, real-time data, allowing investors to make more accurate decisions. AI can help identify and mitigate potential risks in markets and portfolios. By helping you prepare and manage market shifts, technology gives you leverage.