Protecting a Commercial Real Estate Company in a Recession

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Most of the time, people associate leadership with the good times. But as we enter a recession, we must start to ask ourselves, “What about the hard times?” How can we bring people together and lead by example?

As the economy has fluctuated over the last several years, there’s no question that people have experienced stress and moved into a mode of caution. Thank God, I have had the great privilege of leading in both good and bad economic times. Here are a few guiding principles I’ve learned.

4 Ways Commercial Real Estate Companies Protect Themselves in a Recession

1. Being A Confident Leader Helps Your Team Succeed

As a leader, people will rely on you to have a vision and be able to make tough decisions, keep them calm, and lead by example.

I’ve always believed that leading through a recession is about having a vision and a sense of purpose that can resonate with your employees and customers. It means maintaining the same standards that you would during normal business times, but it also means you’re willing to make the tough decisions and take the tough actions that are needed to move your business forward.

In early 2022, as the economy moved towards recession, I knew we needed to position our team at GPARENCY for success no matter what happened with the economy. Part of success to me meant setting benchmarks that removed any unnecessary or unrealistic pressure from our team. We made the difficult decision at GPARENCY to lower our projected growth goals to 20% month-over-month for April. Our original business plan called for this change in the summer, but we realized how critical it was to start planning for what was to come and made the tough decision we needed to make. This change allowed our team to focus on building the right foundation for months to come and think long-term, as well as showed transparency about the current situation combined with optimism about the future. 

Thanks to this change, our team was able to pull back and focus on ways we could offer even greater value in the months to come. Unfortunately, we watched as many other organizations failed to plan and fell into survival mode—often leading to last-minute decisions that hurt the organization as a whole.

2. What Commercial Financing Leadership Is About: Helping Others Make Tough Decisions

Showing great commercial financing leadership during times of economic crisis is not just about having a strong vision and making tough decisions but also ensuring that you’re helping others do the same.

How can you do that?

  • Keep the vision in front of your team.
  • Remind them why they signed up.
  • Show them why they signed up by modeling exactly how they should respond.

People tend to worry about their financial future during recessions, so you must take charge and instill confidence in the team. If you allow your team to get flustered and nervous, they will hesitate and underperform. Employees watch how their leaders react, and they will follow that behavior.

If you lead by example, you’ll be able to motivate your team to do the same. I’ve always been a firm believer that you can be both optimistic and wise.

3. Encourage Your Team To Make Financial Shifts

It’s so important to focus on making smart financial decisions… not when the market crashes, not next month, but TODAY.

The hard reality is that you may have to let people go during a recession. Most businesses do. If that’s the case, my advice is to make those calls as early on and fast as possible. Get your top producers around the table and find out what they need (and who they need) to keep closing deals.

Making Cuts

It may be tempting to wait until it’s absolutely necessary, but in a commercial estate company, I’ve always found it’s better for everyone when you make those hard decisions as early as possible. When you make those cuts earlier on, it means those team members can find new work before businesses are overrun with the competition. It also protects your cash flow, and that could save you from having to lay off more people down the road.

Move into a mode of not caring about impressing people, and encourage your team to do the same. Now is not the time to make commercial financing decisions based on an image you want to uphold… leaders and teams can be stronger through market shifts if they work together today to prepare.

More than ever, having strong leadership in your organization is of the utmost importance. Being a confident leader during these unprecedented times can help your team succeed. At the end of the day, leadership is about helping others make tough decisions—even if that means making some financial shifts within your commercial real estate company.

So, encourage your team and be transparent with them about the changes you’re making. It’s okay not to have all the answers, but it’s important to show that you’re doing everything possible to weather this storm.

Confidence, transparency, and wisdom—these traits are critical to coming out on top no matter what’s coming. You got this, and we can help!

How the GPARENCY CRE Marketplace Platform Can Help You

During a recession, the commercial real estate industry can experience significant disruptions, making it difficult to secure financing and identify profitable opportunities. However, with GPARENCY, investors can stay ahead of the curve and make strategic decisions based on accurate data and insights.

GPARENCY provides access to a range of tools and resources that can help investors make informed decisions and find financing options that work for their unique needs. This includes access to features including an acquisition pipeline that allows you to mark properties as favorites, track every property you ever looked at, and affix notes to properties to recall important details, a database of lenders so you can shop for financing, market data and insights so you always walk into every deal prepared, and expert advice from experienced professionals. GPARENCY’s database of lenders can help investors find the right financing options for their specific needs, even during a recession, as well as provide guidance on market trends and conditions, helping investors identify profitable opportunities that may otherwise go unnoticed.

FAQs

  1. How can a commercial real estate company effectively navigate a recession and maintain profitability?
    • Even during a recession, commercial real estate companies can navigate economic challenges while remaining profitable. Key strategies include focusing on tenant retention and lease renewals by offering incentives and flexible lease terms, managing expenses through cost-reduction measures, and streamlining operations. In addition, diversifying your portfolio by exploring resilient property types or stable markets can mitigate risks.
  2. What strategies can leaders of commercial real estate companies employ to mitigate risks and capitalize on opportunities during an economic downturn?
    • During an economic downturn, leaders of commercial real estate companies can employ strategies to mitigate risks and capitalize on opportunities. This includes diversifying their portfolio, focusing on stable tenants and lease terms, strengthening relationships with lenders, optimizing property operations, capitalizing on distressed opportunities, maintaining strong tenant relationships, staying informed and adaptable, and preserving cash reserves. These proactive measures help protect against market uncertainties, ensure financial stability, and position companies to take advantage of favorable investment prospects that may arise during challenging economic conditions.
  3. In what ways does leading a commercial real estate company in a recession differ from leading in a stable economic environment, and what skills are essential for success in this challenging period?
    • Leading a commercial real estate company in a recession requires financial management, risk assessment, effective communication, adaptability, and strategic thinking. Leaders must understand financial statements and how to manage cash flow and make tough decisions on cost-cutting and resource allocation. Communication becomes crucial to provide updates, address concerns, and inspire confidence. Being adaptable, proactive, and innovative helps with identifying opportunities, adjusting business models, and making data-driven decisions swiftly.

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