Long-Term Impacts of COVID-19 on Commercial Real Estate

Posted by Hannah Lapin on Apr 24, 2020 9:00:00 AM

Looking to the Future

In a recent CrowdStreet Webinar, Wall Street Journal Editor Peter Grant moderated a discussion between Melissa Reagen, Head of Research at Nuveen Real Estate, and Ian Formigle, CrowdStreet Chief Investment Officer. The panel examined the current impacts of COVID-19 on commercial real estate and predicted outcomes of real estate investments in the post-coronavirus economy. We tuned into the webinar to provide you with some of the highlights.

A Look at What is Happening at the Tenant Level  

Currently, according to Reagen, apartment rent collections for April were at 89%, which is only slightly below the normal average. Office building rents took more of a hit with a 70-80% April collection rate, and retail building owners are struggling the most with a 20-30% April rent collection rate.

Further, hotel revenue per available room is down 80-90% on a year-over-year basis.

Predictions for Post-Coronavirus Investments

Now most deal pools appear quiet, yet that will not always be the case. Reagen and Formigle discussed, in-depth, the outcomes of COVID-19 on investments based on geography and investment type.

In terms of geography, there are some cities in better positions than others. Reagen said the Sun Belt Cities, such as Raleigh, Nashville, and Salt Lake City will still be attractive post-COVID. Formigle elaborated that cities with diversified economies and steady metros, such as Austin and Columbus, are in good places. Cities like New York, which are crowded, or New Orleans, which draw a lot of tourists, are not as invest-able.

Reagan and Formigle also anticipated a dramatic change to office buildings and senior housing post-Coronavirus.  Remote work is likely to become increasingly popular, which will reduce the need for office space. For non-remote offices, the square footage per person will need to increase, which means we can expect an increase in suburban offices, since you can get more space at a better price.

As far as senior housing, Formigle predicts it will be on a steady decline. The decision makers are 45-60 years old and are not going to want to put their parents in homes post-COVID.

For more insights, we recommend watching the full webinar, "Finding Real Estate Investment Opportunities in a Post-Covid-19 Economy." For more investor resources, visit our Resource Page.


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Related: Why Might Mortgage Rates Go Up When Interest Rates Go Down?, A Look at the Impact of the Coronaviurs on the Housing Market

Topics: Small Balance Commercial

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