SOME PEOPLE (including some who’ve made a living peddling property to others) seem to be just learning, or didn’t appear to fully realise that a property slump is NOT a separate incident from a general economic slump. The reason property sales volumes and values fall isn’t because a hand on some big cosmic clock ticks over to ‘SLUMP’ — it’s all intimately related to the economic cycle… the world economic cycle. How does that affect commercial landlords? Well, bearing in mind I’m not an economist’s elbow, here goes:
As job losses and company closures occur (each redundancy and collapse heralded in the news), and investment finance firms collapse, funds get frozen and banks turn harsh and stoney-faced, people’s confidence fractures. As each hammer blow strikes, they hold back more and more on purchases, businesses retrench or delay expansion and hunker down. Less shopping translates into less business, which affects retailers, manufacturers, importers, and the various elements up and down the economic food chain — including commercial landlords.
Those landlords who have left it until now to sell their retail unit/warehouse/workshop you-name-it are, given the circumstances, probably willing to sell at a bit of discount. (In most cases, it’s a good bet that the desperate are driving the market.) OK, that’s a bit tough for them. But if things are spiraling down, and the bank is sending alarm signals and reaching for a fresh valuation to justify their loan ratios, well, you may be better to get out before it gets worse.
A friend of mine was in just that situation and sold his business and (until then) owner-occupied Continue reading →