Are Distressed Properties the Opportunity of 2025? | Brokers Round Table

Key Takeaways: Thorough due diligence is crucial when analyzing potential deals, especially when reviewing rent rolls, leases, and tenant mixes. The distress in the market is compartmentalized, so understanding the specific risks and opportunities in each asset class and submarket is important. Considering alternative financing methods, such as paying cash, syndications, or using creative structures like lines of credit, can help mitigate downside risk in the current high-interest rate environment. Focusing on consistent cash flow and tenant quality, rather than chasing higher returns, is advisable. Properties with longer weighted average lease terms (WALT) and diversified tenant bases may be more resilient. Avoiding forced deals and being selective and patient is recommended, as the market has not fully adjusted yet, and overpaying should be avoided. Sitting on the sidelines for a period may sometimes be the prudent choice. Staying attuned to broader economic and geopolitical factors, like the potential impact of US-Canada trade policies, is important as they can affect commercial real estate transactions and operations.