At a hectic time like this, it should come as no surprise that investment decisions across the globe have been drastically affected, including those relating to the property market. COVID-19 has had such an immediate and substantial impact, and many people are unsure of what the future looks like for the industry.
With the speed that it’s spreading in mind, a large number of businesses have to adapt to the difficult circumstances in order to stay afloat, as well as to prepare themselves for how the current events could change commercial real estate and the world we live in as a whole.
The damages it has caused to the industry so far
If you take a look at the numbers, you’ll see that for most companies, the stats are currently in negative territory – and many speculate that the worst times aren’t quite over yet. Aside from lockdown and the risks of the virus, most investors and occupiers are far less confident than they were and are worried about the losses they may see.
The countries that were experiencing the most significant rise in property sales early on were the ones that were hit the hardest due to the pandemic, with the worst being in areas like Portugal, the US, and Greece (however, almost every country has seen some form of loss this year).
There is a silver lining, though. The market hasn’t actually stopped during this time, and although it has been dramatically impacted. It’s certainly not on the brink of collapse. Even during the lockdown, people have been making negotiations, completing sales, and starting projects. This shows that while things are tough, we can still push forward and make the most out of the situation until it improves. The SARs pandemic showed a rebound effect, where those who brought property were able to profit within five years. This is a positive sign that indicates there will be opportunities to take advantage of in this market.
At the same time, with the limitations and declines experienced, property value hasn’t necessarily changed. If anything, prices will only increase to higher levels than before once the demand for properties picks up again. You have to remember that commercial real estate is an illiquid asset and stock markets are at all-time highs. Prices tend to be more stable and less volatile than other assets.
Having the right mindset could make a huge difference
Some investors are waiting to see what will happen next, unsure of whether or not making an investment now will be worth it. On the other hand, there’s also a large number of investors out there who are taking this opportunity to purchase real estate while there are lower levels of competition. A cautious approach is certainly not a bad one, but those who are using the pandemic to make investments are the ones who are more likely to be rewarded in the future.
In many ways, the situation will affect what you allow it to. Even as things are complicated and there are several obstacles in the way, there’s often something that can be done to at least partially benefit you. The industry (and the world as a whole) is always changing, which is why the people who adapt to it are often able to make the most success. While it may not be ideal, there is usually some opportunity that can be seized.
How will the market adapt?
Unfortunately, there really is no way of knowing for sure what will happen. The bright side is that we have been able to overcome a variety of different issues that have presented themselves over the years. Hence, a variety of people are optimistic that the world will return to normal (or as close to it as we can get) soon. The use of technology may play an integral role with Deloitte, noting that “CRE companies could rely on technology to manage operations and interact with tenants.”.
Many are starting to think of the future now, trying to strategize ready for the changes that may come. For the progression of the current circumstances and for businesses to continue and thrive in these times and beyond, they should consider:
- Ensuring that the health and well-being of employees is valued, whether working in a physical space or remotely
- This means providing employees with the correct information on social distancing, and giving them extra support if they are working remotely
- What needs to be done to successfully reopen and move back into physical spaces safely and effectively
- This means adopting the standard protocols and remodeling physical spaces to make them safe as possible
- Making use of technology as much as possible, as well as paying attention to data protection, cybersecurity, and more
- This means utilizing tools such as Zoom, but also having a stringent security policy across a business
- Developing crisis management and disaster recovery plans to ensure the continuity of the company
This means being prepared for all outcomes and having mitigation plans in place.
These are just a few examples of what individuals in this industry could do to set everything back on track for themselves – and therefore also contribute a little more to the recovery of the broader real estate market. The future will vary depending on several factors, from the severity of the pandemic, to how it’s dealt with (in terms of health care, the economy, and more).
There is a lot that we are unsure of at this point in time; what will happen with the virus, and will it spread further? Will we be able to prevent it from getting worse and recover? As a result, figuring out what the best course of action will be to keep businesses alive despite the complicated circumstances should be on the agenda.
The good news is that these businesses in this sector are built on strong foundations and are likely to survive until the situation improves.
This isn’t the end of Commercial Real Estate
While we haven’t faced anything quite like COVID-19, we can see how other epidemics and pandemics have affected the economy in the past. While not the same, there are a number of similarities that can be used to speculate what could happen in the near future.
In most instances, when there is a major crisis that drastically affects the economy, there are three different stages. They depend on the response to a situation, applying changes, and then preparing for the ‘new normal.’ The SARs pandemic is an example of how a situation can be handled, and how quickly life can return to normal, but only if adequate preparation is done. A clear healthcare response alongside proactive communication helped to get the pandemic under control in that instance, and the same will be needed for the current global epidemic.
Many believe that, while the first half of the year caused some major setbacks, there’s hope that the industry can recover during the second half. This may depend on the restrictions COVID-19 will present to us and how we all deal with the virus, but there is certainly hope and a good chance that things will get better soon. It is best to ignore some of the doom and gloom and to work on structuring your systems better.
Exclusively Trending Commercial Real Estate Prediction: How to take action now!
It’s not a secret that many industries suffered as a result of this global pandemic. A scenic drive through a city center or what was once booming business plazas are no longer bursting with customers, ready to drop a few bucks on a special latte or get rid of some dough for a single slice of pizza. Companies, well those who have remained viable in this volatile economic area, are the ones who have learned to adapt.
What’s it going to take to survive in commercial real estate, post-COVID? Wipe the sweat from your brow and the worry from your face. There’s a reason commercial real estate is the longest living economic sector that produces the most breadwinners of any industry. With businesses forced to change and transition, many more industrial places are becoming the new hot topic.
This can be seen by the huge levels of industrial acquisition efforts Amazon is pursuing. If Big “A” is making moves, you can certainly bet it is for a reason.
That’s right, straight from the camel’s mouth, industrial properties are going to see some very nice spikes, especially as more and more eCommerce solutions continue to popup and scale. Former businesses now doubled over as an industrial space or warehouse. Dropshippers, renting office space and storage space for their inventory, the possibilities are virtually endless. We’re not saying that another industrial revolution is coming, but we are expecting to see a nice uptick in the industrial real estate sectors during the wake of the pandemic.