I heard the words, “Black Swan Event” in the last month. I pay attention to the economy and political news as part of my overall understanding of market forces that effect commercial real estate. I did not know what that term meant but the commentator quickly said that it was, “an unpredictable event that is beyond what is normally expected of a situation and has potentially severe consequences.” Wow, this show was giving a comment on the overall economy while predicting continued growth through 2024.
Unbelievably, that was February and today is March 13. I had heard of Coronavirus in very early February. This event is turning “severe” so fast. What are our options and predictions?
The events of the past month have mirrored real estate investment. The time frame of the investment may be stretch over even years, but the results and effects can be related.
You buy a property. It pays well because it is rented. You buy land and the city announces that they are widening the road in front of the property. Or a large development is being built very near either type of purchase. An economic meltdown turns a ten year plan into a twenty year plan. Who can know? The exact timing is certainly impossible to predict, but if history is our guide, most real estate investments do increase in value over time.
President Trump has just declared a national emergency. I am 67 years old and I believe 9/11 was the only other time in my lifetime that this has happened. Some in force commercial sales contracts will not close because of this event. To an agent waiting on that sale it can be catastrophic. The small businesses may not recover and go completely out of business as a result. What does something like that do to the building owner if that business was a tenant of theirs? If this event gets much more severe commercial prices will be affected downward. For 3-4 years after 2008 you could not give good properties away. Those who purchased then have been smartly rewarded today.
The coronavirus scare will end, and normalcy will return. There are always winners and losers financially. That is how economy works. If you are invested in the economy, you can participate in the profits otherwise you sit on the sidelines and wonder why your net worth keeps shrinking. No Pain, No Gain.
I am going to act like this event will not be long term nor will it completely melt down the economy beyond repair. In 2008 we had to reinitiate the complete financial operations of our economy. How many banks failed? How many foreclosures? For this Black Swan event my advice to anyone is to move forward. Do not worry! Do not make decisions based on the last month or the next month. If your judgement was good in January, it is good in May. I am still buying!
Randy Krise, CCIM is the Broker / Owner of Krise Commercial Group in Fort Myers and can be reached at 239 633 8672 or firstname.lastname@example.org