Committed To Your

  1. Home
  2.  — 
  3. Commercial Leases
  4.  — Recession should not hit commercial leases

Recession should not hit commercial leases

| Mar 28, 2019 | Commercial Leases

Recent financial headlines have called attention to the likelihood of a recession in the near future. Recessions have a tendency to precipitate real estate market declines. However, recent evidence points to the fact that these headlines may be false alarms, which is good news for those interested in investing in properties featuring commercial leases in Los Angeles.

One reason why investors may not need to worry too much about the current economic conditions is that overbuilding — which usually precedes a recession — is not occurring at the moment. During 2018’s fourth quarter, the construction of commercial buildings was only 1.3 percent of gross domestic product. In fact, it has not been at or above average since back in 2008.

Another reason why the commercial real estate market looks promising despite recession concerns is that over-indebtedness is not a major problem at the moment. When debt is a major problem, businesses and households may not be able to cope with economic shocks. However, borrowers in general have been careful since the great recession of 2008, with lenders maintaining prudent criteria in their underwriting of loans. As a result, real estate as a whole has deleveraged, with buyers’ debt burdens remaining lower than they have been in decades.

The fact that the industry for properties featuring commercial leases appears to be strong in spite of a recession may certainly motivate more people to become active in the real estate market. However, failure to navigate a deal correctly may end up costing an investor more than he or she bargained for. An attorney in Los Angeles can provide investors with the guidance they need so that their deals will be successful and fruitful long term.