The coronavirus pandemic is continuously hurting several industries, and this includes the vast world of commercial real estate. There are currently no drugs or vaccines that can control it. If you are a commercial real estate professional, you are probably worried and overwhelmed right now. The best thing to do is to contemplate on the things happening right now, and what you can do to earn enough income while enduring this health crisis.
Uncertainty in the Real Estate Industry
What happens when the stock market is behaving wildly? Billions of dollars of wealth evaporate. This is where all the uncertainty, confusion and stress come from. We don’t know when it will end, and to what extent it can impact our commercial real estate initiatives. If the stress and uncertainty push clients to pause their spending, then the entire economy (not just the real estate world) will suffer.
Once people start avoiding their favorite bars, restaurants, movie houses, sporting events and concerts, business earnings decline. Consequently, businesses that supply them, such as novelties, security and trucking, feel the results of lost opportunities. These institutions and organizations own or rent their own real estate properties.
Disruption in Travel and Supply Chains
Auto sales and steel production are down by around 90% in Asia and China. Do you know that the port of Los Angeles’ biggest exports center on auto parts? With the disruption in auto parts sales and usual container transactions, there will surely be a lag in all product deliveries.
From airlines and hotels to rental cars, it’s clear that economic vitality here in the United States rely heavily on tourism. What happens if they postpone their travel plans? There will be loss of revenue for commercial real estate businesses.
The bright side? Lower Interest rates!
If there is something that we can consider a bright side today, it’s favorable interest rates. This makes financing in the real estate world more affordable.
Is there something we can do now as commercial real estate professionals?
This health crisis is evolving quickly, creating a huge deal of uncertainty in several markets. It threatens the lives of so many individuals, as well as asset valuations and economic activities. It’s inevitable that there will be more losses and disruptions within the United States.
As of the moment, expect the markets to maintain their volatile nature. Just take advantage of the low interest rates at this point, and then let’s see what will happen in the coming weeks and months. The impact will depend heavily on how widespread it gets. We can’t really predict the overall extent to the commercial real estate market. Only time will tell.