A storm is brewing on the horizon, and big businesses with a large footprint in commercial real estate are set to experience the most significant fall. The pandemic has changed the public’s lifestyle and consumption behaviors. Office work is passe, remote work is in vogue. In this shifting landscape, where do you, as a prominent business owner, find safety amidst these industry changes?
The importance of quick decision-making
Fitch Ratings predicts the coming commercial real estate crash will be worse than 2008. Worse, the ratings agency expects prolonged recovery. Having experienced the liberating nature of work-from-home setups, workers are not too eager to return to offices.
Unlike the housing market, which rebounded quickly after the 2008 crash because people still needed a place to live, commercial real estate seems doomed to the doldrums. The prospect looks bleak unless the sector can quickly refashion itself into something that will pull in demand.
Deciding to cut your losses or quickly go into lease renegotiations can determine whether your business survives the coming tidal wave of defaults and foreclosures.
Expect to have a fight on your hands
Landlords and banks are under pressure to fight you every step of the way. Their literal existence is on the line in these negotiations. Not only will you need to consider whether a lease renewal is still viable, but you may even have to consider early lease termination if the situation worsens.
Bankruptcy and restructuring
In an even worse-case scenario, you may have to consider restructuring to avoid bankruptcy. No matter what option you decide to take, whether to terminate your lease early or request a change in lease terms, you will need to take total stock of your company’s financial health. Consider seeking counsel to guide you on the legal aspects of your decision.
Booms and busts are cyclical by nature. If your company can survive the crisis, its day in the sun is only a matter of time.