COVID-19 Pits CRE’s Sudden Change vs. Sustained Strength
There have been many articles on the potential impact of COVID-19 on the commercial real estate landscape, and we certainly do not know the full extent yet. This was a good opinion piece that I think sums it up nicely. Biggest impact will be on retail and hospitality for sure. Overall, however, CRE is a very stable, long term investment that should weather this storm.
At PGP, we have been successfully negotiating a variety of lease deferments, debt refinancings and other measures to do our best to take advantage of this current disruption. We are hopeful that, over time, we will be on even more solid footing.
From the article:
“If there’s any lesson to be learned it is that this too shall pass, and we’re going to get out of this and hopefully be stronger than what we were before,” Hatcher said. “It’s definitely different than recent downturns though. We all knew what was going to happen with the dot-com bust, and 9/11 contributed to that, too. The mortgage downturn was probably self-inflicted, but this one is not.”
Pre-pandemic CRE pros might’ve worried about housing affordability, construction labor shortages, unrealistic underwriting assumptions, unregulated private debt funds and other issues. Now the script has been flipped.
“The problem is the short-term damage, mainly in hospitality and retail, could really have longer-term effects that might drag this into a typical downturn,” Hatcher said. “Any deal with a retail component is going to get a lot more scrutiny than perhaps it has in the last five years. This disruption will make everybody check themselves and pause.”