What are the Best Types of Commercial Real Estate Tenants to Have that are Recession Resistant?
The right tenant can have a critical impact on whether your real estate investment remains a good investment, not only in a good economy but also during a recession. When looking for investment properties, there are several factors that you need to consider that will lower the risk, and the right tenant is the #1 factor:
1 The creditworthiness and reliability of the tenant — for example, a franchise with a history of longevity that can do well in a recession. Think about a logical business that can stay profitable in a recession, such as a cheap fast-food restaurant or a dollar store.
2 The location It should be a prominent location near other staples like the grocery store, pharmacy, and fast-food restaurants. Will it be easy to re-sign the lease when it expires?
Look for businesses that are about necessity and lifestyle trends rather than dependent on economic cycles. Good examples are dollar stores, banks, drugstores, medical centers, fast-food and casual dining. These have proven their ability to remain profitable, even in tough economic times.
For example, The 2008 housing market collapse was bad for homeowners, but it turned out to be great for some real estate investors. If you can rent out your property to a reliable tenant, you’ll have a steady income to get you out of the recession.
Look for These Types of Tenants
The key that weathers economic recessions is the creditworthiness of the tenant. The perfect tenant is a corporation with a proven record of staying profitable even in tough economic times. They never stop adjusting to retail and consumer demands and always continue to grow. Other businesses tied to and necessity and convenience do just as well, such as:
- Auto-parts stores
- Convenience Stores
- Dental Centers
- Urgent Care Clinics
But why is that?
Even in a recession, people have to eat. While people may cut back on eating at restaurants, they will still splurge on cheaper items. For example, and alcohol sales and candy sales, tend to increase during a recession.
Food and Beverage
Whether they’re looking for a healthy treat to make it throughout the day or a tasty meal for a stressful situation, there are franchise and business opportunities just waiting to be cashed in on in tough times.
During a recession, most people cannot afford a healthy diet, because a quality meal costs a lot. They have no choice but to eat cheaper, so they go for fast food.
Fast food may not be known not for its dietary standards, but it’s an industry that reaps a lot of profit during an economic downturn.
In a recession, affordable retailers can focus on generic products and use the consumer demand for low prices, in order to make a significant profit. People usually don’t like to shop at a discount retailer, but during a recession, they may have to, and they even buy more. The same goes for thrift stores.