Page 12 - aruba-today-20221202

A12 BUSINESS
Friday 2 december 2022
Is now the right time for your business

to buy real estate?

By HILLARY CRAWFORD
of NerdWallet
For small businesses hoping
to establish or expand their
brick-and-mortar pres-
ence, it may seem like a
bad time to sink cash into
a commercial property
purchase.
Amid predictions of an
upcoming recession, the
Federal Reserve increased
the federal funds rate for
the sixth time in 2022, citing
inflation risks and global A Store For Rent sign is displayed at a retail property in Chicago,
conflict. Inevitably, this will on June 20, 2020.
make loans more expen- Associated Press
sive for borrowers.
In reality, though, the per- rates don’t seem as astro- net ensures their rate won’t
fect time to buy commer- nomical when you look at exceed a set limit, it’s also
cial real estate doesn’t ex- rates throughout history, an additional cost.
ist. And when you consider Dangler says. For instance, YOUR BUSINESS’S GROWTH
the bigger picture, not all the annual average rate STAGE
signs point to doomsday. for a 30-year fixed-rate Typically, more mature
“There are still really amaz- mortgage was 8.39% in businesses have capital
ing opportunities out there, 1992 and 16.04% in 1982. and a strong understand-
but I think it really requires This year’s average cur- ing of their growth trajec-
small-business owners to rently stands at 5.08%. tory.
think about what their Some entrepreneurs, like These factors, plus time in
goals and their plans are,” Elaina Paige Thomas, own- business and more estab-
says Alyssa Dangler, a er of Next Paige Talent lished credit, make for a
commercial real estate at- Management and Produc- more appealing loan ap-
torney and president-elect tion , are choosing to move plication and likely a bet-
of Commercial Real Estate forward despite rising rates. ter interest rate.
Women Network. “It didn’t scare me be- On the other hand, startup
Here’s what small-business cause I know that we can businesses may want to
owners should consider always refinance down the consider leasing before
when deciding whether to road,” Thomas says. “It’s buying right away, sug-
purchase commercial real still going toward owner- gests Max Grover, presi-
estate. ship and equity, so for me, dent-elect of Commercial
COST OF BORROWING that was always the goal.” Alliance of Realtors West
While higher interest rates POTENTIAL RENOVATIONS Michigan.
might not make or break a Buying commercial prop- As opposed to more es-
deal, they could push busi- erty becomes more com- tablished businesses, he
ness owners to cut the size plicated if construction says, some startups might
of their down payments loans are involved. Interest see better returns putting
or reduce spending else- rates for this type of financ- their cash toward inven-
where to accommodate ing are typically variable, tory, equipment, hiring or
larger monthly payments. leaving plenty of opportu- marketing.
Small-business owners wait- nity for rates to climb over Additionally, leasing gives
ing for interest rates to fall the duration of the project. them more flexibility to
might be in a holding pat- To mitigate the risk of a move locations if they
tern for longer than they business being unable to grow.
expected, though. Ac- afford costlier future pay- EXPERT ADVICE
cording to the Federal Re- ments, Dangler explains, Connecting with a com-
serve, future fed rate hikes lenders may ask borrow- mercial real estate agent
are likely. ers to purchase an interest or broker who specializes in
However, today’s interest rate cap. While this safety a particular type of prop-
erty can help buyers weigh
their options. “It helps to
have your own represen-
tation so that your interests
are pursued,” says Barbi
Reuter, CEO, chairman
and designated broker
of Cushman & Wakefield
‘ PICOR, a commercial
real estate firm. “You want
to have the expertise to
move at the right time.”q