How Should the CRE Industry Prepare for the Next Downturn

A recession is unlikely to hit this year, but that doesn’t mean that you shouldn’t start preparing. Experts say that this is the perfect time for investors to reevaluate portfolio performance to prepare for the next downturn—when it does come.

“Real estate is cyclical and it is impossible to predict exactly when a downturn will happen. Most experts agree that the current economic expansion began in June 2009, and, last summer made it 10 years old, the longest in U.S. history,” Ed Hanley, president of Hanley Investment Group, tells GlobeSt.com. “An economic downturn doesn’t impact every market and every investment the same. So, as the current election year unfolds and whether a downturn is around the corner or not, this is the perfect time to evaluate the current performance of your portfolio and how to best position it for the future.”

A portfolio evaluation can include repairs, preventative maintenance and upgrades, all of which can be essential to tenant retention during a correction. “Properly evaluating making capital expenditures now to retain tenants and stable occupancy levels may put you in a better position for the next downturn or market correction,” says Hanley. “Some mall and regional open-air shopping center owners used the last downturn to make large improvements to reposition their properties to be ready for better economic times and the strategy was very effective.”