Given the indicators (and instigators) of an impending recession, how can real estate companies combine past lessons with new approaches to weather the next downturn?
Real estate developers enjoying a period of economic expansion approaching the longest in history have started to see troubling signs in 2019. The inversion of the bond yield curve, when long-term rates sink lower than short-term ones as they did in March, has been a reliable predictor in the past of decline. The trade war with China is certainly not helping matters either, with farmers, manufacturers and many others licking their wounds.
Economists gauging the causes of a recession look to real GDP, real income, employment, industrial production and wholesale-retail sales. And obviously real estate, the places in which we work, live, play, spend and more, is connected to everything.
What should real estate firms do to protect themselves late in this economic cycle? Having a detailed plan is always a good idea, one that focuses on preserving income and limiting exposure. It is also important to maintain critical business connections and relationships through a smart, consistent marketing platform.
New Regulations Effects on a Recession
While new regulations in reaction to the Great Recession last decade have made large-scale systemic failures in the U.S economy less likely, the nature of capitalism, that of risk, expansion and often times pushing boundaries, remains the same. Easy debt and debt securitization were major contributors to the financial fever triggering the last downturn. According to TriStar Real Estate Investment, a tremendous amount of private capital has replaced the lenders constrained by the last round of regulatory checks and balances. It’s a creative response to a capital need, but it’s also unregulated. “Private debt funds may be the next CMBS type of crisis in the making,” said TriStar’s Duncan Gibbs.
Real estate players can’t control market moves, only their own. While no two economic cycles are the same, some things should remain constant. What should real estate firms do to protect themselves late in this economic cycle? CRE companies must stay on top of market conditions and industry trends, of course, but they also should be committed to leveraging the best partners and marketing practices to help them stay on course when the economic seas get rough.
New Technology for Marketing During a Recession
The old days of abandoning a CRE firm’s marketing budget when times get tough constitutes an egregious error in today’s business world. That’s because there are very knowledgeable marketing partners out there that understand the ins and outs of digital strategy and are enabled by the latest game-changing tech tools — display advertising, mobile advertising (e.g. geofencing), paid search, targeting/retargeting and more —to help them be more efficient and spend more wisely to connect with highly targeted prospects. When others cut and run in a down economy, there’s not only less competition, but also more opportunity to direct connect and sow the seeds of future success.
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