How COVID-19 Has Affected the Commercial Real Estate Industry

There is virtually no industry that hasn’t been affected by the current COVID-19 pandemic–and the commercial real estate industry is no exception. While things are slowly ramping up, leaders in the commercial real estate industry need to be prepared for shifts in how a business will be conducted moving forward.

Effects of the Pandemic

Before the pandemic happened, the industry was in a relatively healthy position. In a Deloitte survey conducted in the summer of 2019, 75% of those who responded expected an increase in capital availability for 2020.

However, everything has changed since March 2020, when the U.S began to start quarantine efforts. Financial markets began to decline, and this impacted brokers, property owners, and developers in the commercial real estate industry.

Many state-mandated closures for businesses, and because of this, rent relief requests were at an all-time high. To make matters worse, new investments dropped 30% in buyer traffic, as reported by Deloitte. The magnitude of Covid-19’s economic implications reaches rental occupancy across various commercial real estate developments, tenants had been requesting rent relief. 

How Will the Industry Recover?

How does an industry that has been severely impacted by the economic hardships come back? The most significant step will be to change how end-users pay close attention to health practices. Consider social distancing, sanitization, and space layout are all things that need to be on investor and developers’ minds.

Rent is also something that might need to be adjusted or negotiated for commercial tenants who have had a drop in business due to the government-mandated closure. There’s always room for creative negotiations to save both the renter and tenant’s bottom line, like waiving fees in exchange for an extended lease. Improving virtual tours will become more essential to attract potential tenants or buyers.

Is It a Good Time to Invest?

There’s no sugarcoating this–real estate investments have dramatically decreased since the pandemic started. However, some buyers are looking for good value in the current real estate market. Currently, it is difficult to assess and risk, since there is no end in sight for the pandemic. Once travel and shopping start to stabilize, we will see the value of the market.