Right now, watching the Covid-19 curve climb exponentially the outlook for commercial real estate seems bleak.
First and foremost it is a time to protect yourself and your family and there is so much information out there. We are all sick of it
The video below is a little long-winded but it is the most practical and well-articulated information I have heard on the Coronavirus. So make a cup of coffee and sit down and listen. Better yet, sit your family down and get them to listen with you. It is important and Netflix will still be there tomorrow
There are reasons to be optimistic that you will not contract Covid-19. Please take the time to listen to this. Click Link – Cornel University Overview
After protecting our families and ourselves we have to step back and ask ourselves what are the implications for all of us in the world of commercial real estate? These are the early days and we will learn as we go along. I have been speaking with appraisers to get their thoughts. Up until a few weeks ago, the real estate market was increasing at a rate we had not seen since before 2008. Most people in the appraisal business had predicted a downturn, or correction looming before we had ever heard of Covid-19. They are telling me now that they believe that this event will trigger this correction. One Appraiser emailed me that once the dust settles, he believes that we will see a correction in values of between 15-35% – as we recover from the lost revenues of this pandemic.
There was an excellent article in the New York Times on March 20th – for full article – Covid-19 and Commercial Real Estate
The gist of the article is that there’s downward pressure on every aspect of every asset class. Assets can’t be valued when tens of millions of people around the world are locked in their homes and commerce has largely come to a halt, with no idea how long the crisis will last. Lack of consensus about the current or future value of assets is also threatening property sales, closing an exit door for investors and landlords. Investment activity could fall by 45 percent this year in the US, Already, large deals are collapsing or getting postponed. The even bigger question is what will come when the crisis recedes. For every kind of property – not to mention a wide range of human activity – there will likely be long-lasting changes,
Investors in real estate make their money when they buy. There will likely be opportunities for acquisition as the Covid-19 situation gets worse before it gets better and before the world at large sees the light at the end of the tunnel. Listening to the Cornel video and understanding what to do has made me understand that there is a light at the end of the tunnel and it is not a time to be fearful. Investors in commercial real estate should be optimistic that investment opportunities may come their way and they should prepare themselves to take advantage of them
For commercial real estate investors that are already fully invested in the market. It is time to hold on and develop strategies with tenants that will enable you to survive until the crisis subsides. Please see my blog post: Lessons For Landlords and Tenants From The Corona Virus
Please stay safe and protect your families first