Commercial Real Estate after the Coronavirus! – Press Release
IRVINE, CA / ACCESSWIRE / December 26, 2020 / Americans are likely to see more “for rent” signs in the coming months as many corporations destroyed by COVID-19 leave offices and shop fronts.
The pandemic has affected the way people use and interact in public spaces and is likely to have lasting effects on commercial real estate. The coronavirus is now a global phenomenon with two-thirds of the world’s population living under some kind of lockdown or quarantine. People can no longer work, meet, eat, shop and socialize as they used to be. The world of work quickly transformed from business as usual to office closures, work-from-home mandates and production booths. “Coronavirus could restructure America’s commercial real estate and industry,” said Clement Ziroli Jr.
While commercial real estate tends to generate high returns, residential real estate is known to be much safer investments during a pandemic. As businesses close, people will always need places to live. It is therefore unlikely that the COVID-19 pandemic will have a lasting effect on demand for residential property. Landlords of single-family houses and small multi-family houses can expect rental income. Plus there are still motivated sellers in the market in 2020.
Clem Ziroli Jr., who served on the board of directors of the California Mortgage Banking Association (CMBA) and the Community Home Lenders Association (CHLA), believes we are seeing the first signs of stress in the industry as customers want to pull you out of office space they can no longer afford and the number of claims is increasing.
In early August it was revealed that Simon Property Group – the largest owner and operator of shopping centers in the United States – was in talks with Amazon to convert some of the space previously used by distressed retail tenants into distribution and fulfillment centers to convert. Amazon had already converted some locations from “fancy shopping malls” in northeast Ohio to fulfillment centers. The e-commerce giant continues to do well amid the COVID-19 crisis, doubling its second-quarter earnings year over year to $ 5.2 billion, despite the worst economic decline the US has ever seen.
The question is what happens next. While some are trying to work their way into distressed assets, it is very likely that the commercial real estate market will never look like this. We have never seen this pandemic before, “notes Clement Ziroli.
“The commercial real estate industry was really under the radar this corona-hit 2020, but it hurts a lot,” says Pac W. Dong. The demand for office space has fallen. In the last quarter, office rents were at their lowest level since the Great Recession. With this in mind, some developers and financiers are taking a step back to build more office space.
“The pandemic has really accelerated the trend towards online shopping and away from personal shopping,” said Clement Ziroli Jr., specialist in acquisitions and leasing. Public concern about the virus could result in some businesses like movie theaters and shopping malls having less traffic weeks or months after they reopen. As shopping and travel begin to stabilize, the value of real estate becomes clearer. It will be interesting to see how real estate reacts in a second wave of COVID that many believe has already started. “It will bounce back as soon as the world normalizes, but not as quickly as some optimists say,” said Pac W. Dong.
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