The Impact of the Coronavirus Pandemic on the Commercial Real Estate Sector
Even as countries across the globe are easing their coronavirus restrictions, there’s no denying the pandemic’s impact to economic life. As investors look nervously towards an uncertain future, a financial fallout will certainly cause widespread disruption to businesses.
This could spell trouble for the commercial real estate industry which thrives on rentals and value-add components. But with the abrupt slowdown in economic activity, property owners are hard-pressed to maintain their bottom lines amidst high market volatility.
But just like any other crisis, the pandemic will certainly be a phenomenon that property owners, investors, and tenants will need to adapt to. Indeed, policies will change along with business practices and other activities that may continue under the so-called new normal.
That being said, the commercial real estate sector remains resilient. And though it might not be as recession-proof as anyone would point out, the market can still be a wellspring of opportunity if you are able to address the following issues properly:
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Investors who are looking to expand their portfolios will have to consider the pandemic’s impact on the way they zero in and close deals on profitable assets. No doubt, the buying processes will change considerably as property owners and buyers need to adhere to social distancing rules. What does this spell for buyers conducting due diligence before closing a deal? More importantly, how can sellers make disclosures on existing tenants who were diagnosed with CoViD-19? There’s a lot to take in along these lines, but property owners will only need to exercise a high level of responsibility and transparency. Buyers, on the other hand, may need to be meticulous by asking the right questions on the negotiating table.
In any crisis situation, communication is vital in terms of maintaining the operating capacity of an asset. This is why owners should be able to reach out to property managers for updates and issues that are encountered each day. The virus is moving at a rapid pace and governments could hardly catch up, so it’s always important to relay advisories and other types of information so everyone knows exactly what to do. Indeed, strong communication lines can help you keep up with developments as they unfold and comply with changing health regulations.
3. Retail units
For renters in the retail business, property owners can offer covenants that business owners will need to agree upon in order to continue operating in line with current health standards. The covenant should outline allowable store hours as well as other measures such as encouraging customers to keep a two-meter distance from each other and providing proper facilities or equipment for disinfection.
Since the pandemic is affecting everyone’s capacity to earn, property owners may have to offer rent relief arrangements, which could be problematic. Recently, commercial tenants in California are poised to renegotiate their leasing terms if a bill favoring a moratorium for small businesses is passed. Commercial property owners are opposing this measure might put a strain on operating efficiency and run landlords to the ground. A more rational arrangement between tenants and landlords is needed. They will need to work together in coming up with a more viable solution.
If you are a commercial real estate owner, landlord, or investor, you can check out this list of resources from the National Real Estate Investor. It includes everything you need to know about getting tax relief on your property and reaching out to the right institutions.
Looking for profitable commercial properties to add to your portfolio in the DFW area? Contact Arbrook Realty today and start looking for valuable opportunities.