COVID-19 Impact Mitigation for 3 Popular Real Estate Investment Types
April 15, 2020 | Kyle Engelken | WealthForge
During the tumultuous economic period caused by the coronavirus pandemic, there are a myriad of indicators of public market performance. The Dow Jones Industrial Average1 had its largest single day drop in history, and the Federal Reserve has cut interest rates to 0%. But it can be harder to determine the effects on markets that are not reflected in the stock market.
While commercial real estate has historically been a slower reacting market, if COVID-19 continues to have an impact on the broader economy, it will eventually show in real estate markets. Formerly reliable tenants may suddenly not be able to afford rent. Quarantines and social distancing will create slower revenue and growth in commercial real estate and may cause defaults on commercial loans. New construction projects may be delayed due to supply chain disruptions and labor shortages. Some places, such as major cities in California, have put moratoriums on commercial evictions, which may prevent property managers from being able to collect money or re-lease space, and may create an inability for owners to pay their mortgages or provide dividends to their investors.
According to Cohen & Steers, a real assets investment management firm, hotels, hospitality, senior housing, retail, and offices will be most affected. Meanwhile, single and multi-family housing, cell towers and data centers, industrial, self-storage, and medical will likely be less affected.
