In a time of crisis, panic tends to be the number one enemy. It clouds our judgment, makes us irrational, leads us to make erroneous decisions,compels us to move too quickly without being ready and puts assets or ourselves at risk. But the path to quick economic recovery is not built on panic, rather, it is built on sensible planning and thinking.
That is why, on the latest edition of Bproperty Talks: Real Estate Reality, when Mark Nosworthy of Bproperty stated that whatever decision is made, make sure it is not being driven by panic and is absolutely correct.And this is even more appropriate in terms of dealing with commercial real estate where one bad call can hamper all the progress made and any future potential.
There is no doubt that now is a time of uncertainty. Almost everyone and every organization is going through a difficult time — some more than others. They are having to rethink their position, re-evaluate their stance on several aspects of venture and adapting their business plans according to the emerging needs — at least that is how it should be. Many businesses are now open as the unofficial lockdown is relaxed to a certain degree.
However, almost all of them have suffered stagnation if not a loss. As a result, the immediate thought that comes into mind is to reduce expenses and cut off losses so the business can stay afloat. Generally, that is a sound frame of thought — reducing expenditure, if possible, tends to be a viable way to move forward in the face of a downturn. But if the plan is to let go of planned or existing real estate to reduce cost, it warrants a second and more thoughtful look as once lost, it is very difficult to regain a valuable real estate.
After all, it is not often that we see businesses let go of prime real estate unless something drastic has happened. The famous “Bata Signal” circle of Elephant Road is a great example of it.The brand has occupied the store location for years because the intersection it sits on sees thousands of people come and go. In fact, many of the shops located in that particular area have been there for years and have, more or less, elicited profitable results for them.
Aside from profit and attracting customers, the location of a store or office also works as a symbol of status — particularly when they are located in high-end commercial zones such as Gulshan, Banani and Bashundhara Shopping Mall. Locations such as these are perceived as “Premium” and only businesses that dabble in the premium market-segment tend to operate there. It is a perception that is true to some extent.Having an office in such locations instantly gives credibility to a business.
So, whether a business operates out of Gulshan, Dhanmondi or has an outlet in any convenient and valuable location, letting go of it in a state of panic can be a grave mistake. Be it a rented or owned commercial property, it does not and will not take very long for someone else or some other business to swoop in, take your real estate position and capitalize on the value of that said location.
It is also important to keep in mind that scrapping future real estate plans in the face of uncertainty can be as damaging as letting go of the existing property and holds the same detrimental effects. As such, even when a business is going through a significant tremulous period, real estate should be the last thing that comes up when thinking of cutting costs.
On the other hand, while some businesses are/will contemplate the idea of letting go of properties, there are/will be others looking to invest and expand. At the end of the quarantine period, we will see several new players emerge from the pandemic’s shadow. Businesses such as Chaldal.com and other online-based services that deal with FMCG and other products are currently seeing an unprecedented boom, and this is not going away anytime soon.
The Covid-19 situation has been a great game changer that is also changing the way we behave and operate on a daily basis. As such, once everything normalizes, these emerging and growing businesses will probably look for new places— one, to better streamline their services by acquiring warehouses and local branches and, two, for office spaces in more promising and valuable locations that correspond positively with the recent mantle.
However, this euphoria and over-enthusiasm can also be a pitfall for some entities as well, particularly for those whose over-enthusiastic and emotional thought process trumps rational and logical planning. Over-extending one’s reach is a quick way to stretch thin and crumple — as we have seen many do over the years. Commercial Real estate investment — both rent and buy — is a big investment by itself and needs proper planning, not just one or two years — rather, five to 10 years into the future. Only then can such a course of action justify a decision.
The state businesses now find themselves in can be quite puzzling and taxing, to say the least. A lot of calculations, re-evaluations and decision-making needs to be done before moving forward since, as declared by major institutions such as IMF and DB, the world heads into recession. But it is important to keep in mind that real estate is one of the best investments one can make, regardless of time — especially in the context of Bangladesh where lucrative and valuable real estate is scarce.
Letting go of property is not always a wrong decision. Sometimes it is absolutely necessary to ensure the survivability of a business. But that decision needs to come after much deliberation and, even then, not easily.
