NAIOP, the Commercial Real Estate Development Association’s prediction is that the COVID-19 outbreak will alter the traditional practices and boost new trends in the commercial real estate market—which will cause a drastic change in the industry faster than anyone had expected. This health crisis will result in some short-term disruptions in the real estate industry, but it will also lead to expansion of the commercial real estate market in general—especially in the industrial and warehouse areas.
According to a NAIOP research economist, coronavirus is not a financial crisis but rather more of a natural disaster. While it has certainly brought a lot of changes and requires responses to be prompt and drastic, the fact that it is a financial crisis, the rules of the game in the market stay the same, only that the timeline has been altered.
These are that trends that will affect the commercial property markets:
- Before the coronavirus became pandemic, it is expected to be a great year this 2020 for the real estate market as projected based on the great start in January 2020 following the year 2019 which actually ended quite well. But experts are also predicting a possible recession in mid-2021 due to the decrease in demand brought about by the lagging supply of commercial spaces, plus the lingering trail of economic uncertainty caused by this ongoing health crissi. However, it is believed that it will bounce back quickly and progress at a moderate pace, the same as what we have seen in the early months of 2019.
- Technology has played an important role in the continuity of businesses—people now rely heavily on online shopping, or ordering of food online and just get it delivered home. While want to purchase now or soon as the health crisis has subsided, also rely heavily on the internet to know more about the property they are eyeing on—video chat tours, remote virtual tours, tours with robots and others.
- The office sector has also been experiencing changes in the working patterns. With the stay-at-home order in place, employers are encouraged to allow their employees to set up work from home. So, as most of the employees, especially the ones in the customer service and support industries, work remotely from home, office spaces are currently vacant. But as soon as the virus is contained, everything is believed to go back to normal and operate the same way as it had before. Unless other companies will ponder on continuing to offer work from home to their employees, in this case, office spaces may face a little issue, but not too significant.
- In the industrial real estate market, there will be a decrease in the retail of brick and mortar particularly the small and private businesses. Online retailers in particular, will continue to be offering service as least the ones that can be done remotely like customer service. But overall, this area of the industry will continue to decline.
- The ongoing global pandemic will also have a significant negative impact to the industry’s hospitality sector—the hotels and restaurants. But sooner than later, they will be the ones to bounce back quicker.
As the Cliché goes, when life gives you lemons, go make some lemonade. Experts say that some investors are actually trying to hunt for opportunities in the middle of this sudden turn of events. Even so, the negative sentiment has slowly creeped up into the private real estate investment world as the coronavirus pandemic has caused uncertainty in the markets.
Public real estate firms were greatly impacted, and what hurts the public markets also bleeds into the private real estate sentiments. It is turning out to be a waiting game. The key here is the duration of the containment of the virus—the longer it lasts, the more hurt it brings to the economy and essentially, it will ripple to all other industries including real estate.
But, it is always good to see that the public market is taking a role to track private investment trends and is doing it quite strongly. On trying days like these, seeing the public and the private institutions looking out for and taking care of each other, make people feel good and safe.
At this time of crisis there are still investors who are still in business. If you need to sell your house fast Los Angeles, you can contact Mrs. Property Solutions and they would be happy to help.
