INFLATION STRATEGIES FOR COMMERCIAL REAL ESTATE DEVELOPERS

Written by David Kotter | Feb 19, 2025 6:06:03 PM

How to use inflation to your advantage in a very tough market. Here are some things to utilize when you're working on getting your deal funded:

Watch and Lock: Inflationary environments can be volatile, so take the time to slow down and create something where you get an alert every time a major event happens in the market.
Do Loans with No Prepayment: Setting up loans with no prepayment penalties afford you the flexibility to get out of a deal if the rates go up. Take the time to negotiate so you can have the freedom to move when rates move.
Use Inflation-Hedged Products: Look into rate caps or swaps as a way to hedge what the market is doing. These can get a little more complex but also can be a great opportunity.
Focus on Tax Reduction: Many times, you can work through local municipalities to get your taxes lowered. There are many states where you can get into partnerships and programs they have in place. Reach out to your local city planner and ask if they have anything that could possibly reduce your tax expense.
Focus on Insurance Reduction: We all know that insurance expenses have gone up, but this may be a time to get creative. A good tip would be to call multiple commercial insurance carriers. Once you do, have them give you ideas on how the carriers will lower their insurance expense. You might be surprised that someone else has taken the initiative to create some great ideas.
Pivot to a New Industry: Just because inflation is eroding your pocketbook doesn’t mean that other industries aren’t thriving. Think of oil and gas, commodities, healthcare, and cybersecurity as just a few. Get your juices flowing, find some cross-over connections to what you do, and let the light shine on ideas.
Think Addition: Is there something you could add to the property? Are there any additional parcels or ways to expand your square footage? This might be an interesting way to expand additional income factors for your project.

For any additional questions, or ideas on how we can help your deal get funded, call Dave Kotter at 602.367.8795 or dave.kotter@integrity-capital.com.

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