Corona Virus and its near term affects on Commercial Real Estate

As we go on hold like everyone else, there is most likely a question about corona virus and commercial real estate. For starters, we can run comparisons with former virus outbreaks. We are all concerned how this will affect our business. Uncertainty is not healthy for anyone be it an investor, large corporation or small business owner. in the past during flu outbreaks, the commercial real estate market did contract. Once the risks disappeared, the commercial real estate market rebounded on average within 3 to 6 months.  With more people having to say home from work with less interaction, some may wonder how long will this last? Let’s face it nobody really knows how long it will take to have a vaccine ready.  Moving forward , it is reasonable to feel this will last for at least another month or two.  Human vaccine trials are happening right now, just announced today. 

Fundamentals

Fundamental forecasts still predict economic growth because this is not a financial crisis yet. Slow down, yes there is no doubt business has been slowed to halted due to the virus outbreak.  Values on your property is about supply and demand, as we come out of this situation and your property is valued high perhaps you should sell. If this situation exists for a few months buyers may have opportunities to purchase. It is too speculative to define it one way or the other. The FED will backstop  financial markets, this will temporarily hold the market steady just like it did for the financial crisis and keep lending rates at zero.

For Businesses that Lease Property

Virus and commercial real estate leasing situations. If you are a tenant and lease commercial real estate, what should you do? It can be very tough running a business with mandatory closures obviously. Ask your landlord if they will give you an abated period or a “discounted” period. The worst they can say is no, however Landlords do not want multiple businesses falling out of their properties.  As a tenant, especially if you have a good pay history, your landlord could be more accommodating.  Bottom Line- “ask”. For some of you , you can ask a commercial real estate attorney to review the “Force Majuere” provision in your lease. Also, if you have business interruption insurance you can review your policy to see if you do have coverage under this policy. Moving forward perhaps down the road, you should look at some type of business interruption insurance, however make sure it provides some coverage that is reasonable.

Touring and discussions about property during virus issues

With the internet , teleconferencing and virtual tours it is possible to discuss potentials and potentially tour commercial real estate online. Virtual tours have to exist for a realistic tour online. For commercial real estate this is not as popular as the residential real estate industry.  Shire Commercial is familiar and can use these technologies to help our clients thru this situation.