It’s not so much the virus itself, but the fear COVID-19 instills in the general population that may lead to a significant disruption in the previous upward trend in commercial real estate. And just as it’s nearly impossible to predict the full ramifications of coronavirus, it’s equally hard to predict what will happen to commercial real estate.
Unless you’re a fortune-teller, which most of us aren’t. However, we want to provide you with as much information as possible, nonetheless.
Like the rest of the world, COVID-19 took the commercial real estate industry by surprise. Many companies did not have contingency plans in place for a pandemic situation and are still fumbling to get up from the initial knockout delivered by mass business closures.
Meanwhile, social distancing requires most employees to work from home, which may prove to be an issue for some companies.
Now, this is where plenty of commercial real estate investors are feeling the rub. Company-wide travel restrictions are quite commonplace right now, and make it more difficult to conduct meetings, transactions, and property visits.
Those companies who haven’t put a stop on travel altogether still have to rethink plans as events are getting canceled left and right.
Not Business As Usual
The possible long-term ramifications of small business and retail closures extend across the commercial real estate industry. And it’s not just interest rates and stock market sell-offs.
Construction materials: Commercial real estate executives are anticipating the spread of the virus will mean an increase in the cost of materials and overall availability.
Lay-offs and jobs: Retail tenants may have trouble bringing in profit with the decrease in business. Some renters no longer have income and will be unable to pay rent, impacting the multi-family real estate sector.
Delayed deals: Continued uncertainty means commercial real estate investors are waiting to pull the trigger on deals and cutting the number of transactions. This could lead to a recession if COVID-19 continues to spread.
Still, some investors believe the impacts of COVID-19 will eventually play themselves out without long-term problems for commercial real estate. The final effects of the pandemic will be determined by what’s outlined in the upcoming federal fiscal relief package.
At DRK and Company, we’re committed to keeping our staff and clients safe during this time of uncertainty. We are providing our team with the latest technology to work without interruption and provide project deliverables on schedule. If you have further questions or concerns, call 614-540-2404 or contact us online.