Take a Fresh Look at Real Estate
Current Take: COVID-19
The recent challenges due to COVID-19 have compelled business owners to examine their use of real estate. Many business models have shifted toward contactless transactions, from viewing available goods and services to delivery and payments; this could translate into permanent changes in how businesses use physical space. We recognize the uniqueness of the situation and encourage you to think about your real estate needs to provide the support your cash flow needs in the future.
Spending on real estate can be an inflexible expenditure that represents a large percentage of a business’s use of cash. As more and more commerce is executed online, it’s important to consider your use of brick-and-mortar space. Consider how your product or service has changed over time, as well as your method of delivery, as you think through the alternatives listed below.
Evaluating the amount of space needed
- If you’re doing more virtually, reevaluate how much physical space you need.
- Try a pop-up or sharing with a partner when you need more physical space.
Location, location, location
- Gauge how important foot traffic, parking or a ground floor location is to your business.
- Decide if you need to be in a prime location or if you can be off the beaten path.
To rent or to buy
- If you are looking to buy, make sure you have the funds to make a down payment.
- Research how monthly mortgage payments compare to monthly rent.
Your banker is your resource
- Ask a banker to help you think through the variables of real estate spending. They’ll have the information to help you get what you need.
Use these ideas to help optimize your use of cash on real estate. Your business is constantly evolving and so are your real estate needs; evaluating after different time periods ensures that cash spent on real estate makes sense for what your needs are today, not what they used to be.
For Informational/Educational Purposes Only: The author’s views may differ from other employees and departments of JPMorgan Chase & Co. Views and strategies described may not be appropriate for everyone, and are not intended as specific advice/recommendation for any individual. You should carefully consider your needs and objectives before making any decisions, and consult the appropriate professional(s). Outlooks and past performance are not guarantees of future results.