Most of us are aware of the threats currently facing the economy. We have recently seen inflation hit a 30-year high, interest rates rise to a 13-year high, the stock market crash, personal and business debts rise, unemployment rise, Corporation tax increase, National Insurance increase and crypto currencies crash.

The commercial property market has been badly affected over the past few months due to all the above factors and also due to supply chain problems, staffing problems, people working from home and train strikes. People are also generally cutting back and spending less money on food, clothes, general household goods, alcohol, cigarettes, petrol and entertainment. Asda claims shoppers are asking their staff to stop scanning items when the total of their shop hits £30.

Whilst businesses continue to struggle, they will find it hard to pay rent on shops, offices and warehouses. Landlords who do not receive rent will then be unable to pay their commercial mortgages and soon banks will have no choice other than to repossessing these properties. This is when things will start to get very bad.

Once banks threaten to start repossession proceedings, landlords will panic and rush to sell their commercial properties. In order to sell quickly, they will have to slash prices and sell at big discounts. The vultures will then circle and all prices across all sectors will dive. When this happens, even those who don’t have to sell will suffer as their properties will also fall in value.

This may sound dramatic but it has happened before and will happen again. Some say a recession is only several weeks away and commercial property investors are starting to see major cracks appearing everywhere in the retail, office and industrial sectors. Some are selling now to before it is too late, some have put a hold on buying any new properties and others are getting ready to sell.

The commercial property investors who are most at risk are the ones who bought within the last 18 months. They got caught up in the post Covid buying frenzy and paid prices which today look very expensive. When the market starts to crash and prices start to fall, they will be the first ones to suffer as the value of their properties start to fall below the value of their loans. Once they are in negative equity, the game is over for them.

Although we are still buying, we are clearly being very cautious. As a result of all the bad news, which is emerging day-by-day, we are being very careful what we buy, what we pay and what our plans are if the market crashes. We are still keen to buy high street shops, convenience stores, doctors’ surgeries, banks, pubs, hairdressers, restaurants, small office blocks and small warehouses. We will also buy houses and flats, especially those with sitting tenants. However, we don’t want to buy vacant properties unless they are very cheap.

In conclusion, commercial property investors should watch the economic fundamentals very closely and if in doubt, sell now before it is too late. As my grandfather said to me, you can’t go bust taking a profit.