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With interest rates still on the rise, it is understandable that firms are worried about their marketing strategies in commercial real estate. Indeed, high interest costs charge more money to borrow which decreases the profitability of property investments. However, companies need to bear in mind that the effects of raising interest rates on CRE marketing are not always pessimistic. This paper has sought to explain how interest rate increases impact the market and how firms can adjust their marketing strategies to ensure that they remain profitable even in the worst of times.
To start with, there is a need to look at the effect of rate increases on the CRE marketplace. If the interest rates go up, then the cost of borrowing money through debt increases to the business people and even the individuals. This may result in a reduction in demand for commercial real estate since firms do not require additional spaces to expand or move to other premises when borrowing costs are high. Further, higher interest rates yield lower expected rates of return, and the worth of cash flows later becomes devalued when investments are made in real estate. These processes can result in property devaluation and a reduction in the rates of new construction projects.
However, two things are important to remember: firstly, the effect of increased interest rates is less the same for all categories of commercial real estate; In fact, some of the industries may gain from higher interest rates as they face. For instance, the industrial sector might benefit from the increased demand resulting from companies attempting to move their supply chains closer to home to minimize transport costs. Furthermore, there is a possibility that increasing interest rates may present a positive effect on the hospitality sector since they may make traveling locally more attractive therefore boosting the advertisement for hotels and resorts.
Therefore, what can companies do to keep on marketing their products in the face of the current high interest rates? Here are a few tips and ideas to help navigate the trenches:
When there are high interest rates, organizations are more likely to be careful when investing in real estate. Hence, companies must articulate the value proposition of the properties to the intended users. It may call for focusing on aspects such as special features, such as light to energy-efficient features or premises positions that could enable organizations to minimize operating costs.
In the case where the borrowing costs are high, then it is always preferable for the business to make short-term-oriented decisions rather than investing in long-term ones. However, using research, companies can show that investing in commercial real estate is a long-term investment that will help cushion the effects of high interest rates. For instance, they may call for attention to the probability of gaining rental revenue, capital gains of the commercial property variance over time, or tax advantages of owning a commercial property.
As many companies are still operating remotely, the significance of digital marketing has only increased. It is about time that companies concentrated on posting high-quality content that is likely to attract the attention of their target market and make their properties look as appealing as possible. Such measures could include professionally taken photographs and videos, virtual tours featuring their properties, and other interesting frames depicting their properties.
High interest rates reduce the ability of firms to obtain conventional financing for real estate marketing, but there are other options available to firms. For instance, they may look at crowdfunding, private equity, or seller financing as the other choices.
In conclusion, therefore, it is important not to despair when marketing commercial real estate when interest rates are on the rise. When analyzing the effects of rising interest rates on the market, one can see that companies can always sustain themselves in the worst of situations if they can adjust their marketing strategies in time. In other words, by targeting value propositions, insisting on long-term gains, utilizing digital marketing, and looking at creative financing solutions, companies can survive the trenches and emerge victors.
At FocusedCRE, we believe that adaptability is key. By staying ahead of market trends and leveraging innovative strategies, commercial real estate firms can navigate challenging conditions and thrive, turning obstacles into opportunities for growth and success.