For the past couple of weeks we have been focused on gathering information that will help us help you make some sense of out of the COVID-19 challenge, particularly how it will impact the direction of the commercial real estate market. A couple of quick thoughts:
Unlike the last big economic punch we took to the gut back in 2008, this one is not a systemic failure of our financial system.
It’s an exogenous event unrelated to the workings of the economy. That is an important distinction because we think it will have a much different end game. The rapid response to the virus arriving in the US has been breathtaking to say the least.
But, that may mean that the recovery could also be a quick one once we get the upper hand on the spread of the virus. For the moment folks are justifiably spooked by the abrupt volatility in the equities, bond and commodities markets, and have good reason to hit the pause button on big decisions while they wait for additional information that provides more clarity.
Thus far, we have seen some transactions put on a short hold while others forge ahead without delay. It appears to depend on the specific need and industry sector. Clearly, some businesses will see a bigger impact than others. No surprise there. Those with long term hold strategies are less inclined to alter course, but we think those who were contemplating dispositions prior to the Covid-19 scare are likely to put those plans on the front burner. Clients we talk to see the current situation as temporary, but they also recognize it as serious enough to figure into the decision matrix.
Some buyers see it as an opportunity to lock in the lowest mortgage rates in history, which is there for the taking, while some owners are thinking about getting out by cashing in on windfall gains. Other than the uncertainty over the virus, the dynamics of the real estate market remain the same: low supply, strong demand and cheap money. Not a bad combo even with the uncertainty factored in.
We want all of you to know that we are here to help you sort things out whether you plan to buy, sell or lease industrial real estate any time soon. Our job is to help you make informed decisions by keeping you in touch with the real estate market and the economic factors that impact it. To that we are deeply committed. Please call on us no matter what you need. We are here to help.