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Is It Now Time to Sell or Hold Onto Your Commercial Real Estate?

 

I’m generally an optimistic person; but I’m also a realist.  Things have been looking up in Mid Valley for a while now and as the saying goes, “what goes up…..”   While I’m no soothsayer, I know we will see changes in the commercial landscape.  Overall, regardless of this talk, I’m optimistic. 

  

There are already signs warning us of a downturn. For example, when cap rates have been decreasing on investment properties, (and they’ve now plateaued and they haven’t been getting lower for a while) it is possible that we have hit the market peak.  History tells us that the next major move will most likely be down. 

 

So what is your strategy going to be?  Ride it out or sell at the top of the market?  But if you’re someone who would like to sell one or more of your properties before the next downturn hits, ask yourself, “Would now be a great time to cash in and take my money, or get into another kind of investment, or do I still think that my property will continue to appreciate even more before this next downturn hits?” 

  

With this in mind, you will have to look into your crystal ball to see how much lower you think cap rates will go before this next downturn hits us, and see if you’ll find someone who will ultimately pay you that higher price. The goal is to get ahead of the lenders because as soon as they begin recognizing a downturn they’ll tighten lending standards. 

  

Ultimately, many commercial property owners, even ones with one or two properties, have found this is a solid investment that, if properly maintained, will hold its value through market changes.  So, putting all of this together, if your plan is to remain a long-term holder with your commercial real estate, there’s no decision for you to make right now about selling.   If you look around the Valley, you will see that while there is a good deal of vacancy. I expect you will continue to find excellent opportunities to lease, purchase, sell or exchange your properties through the next season.