Recovery of Commercial Real Estate
According to Connect Commercial Real Estate, a leading company dedicated to delivering current real estate news, the second half of 2020 is looking at a strong recovery. Interest rates will continue to stay low which will perpetuate the flow of money in the commercial space.
In contrast to the rest of the economy, commercial real estate has stayed active within the industrial, investment sales, and multi-family sectors. Deal volume has increased and many properties are experiencing more cash offers than ever before.
However, outside these three areas, office and retail space are encountering various pressures.
To touch on an article Sutton posted earlier this year, “Office space is not dead, it’s just evolving.” The same goes for retail. The desire to open brick and mortar storefronts is still appealing to some who feel the need to shop in the physical sense. But stores may become more of a “teaser” with the majority of products still found on their websites. This will force stores to create a stronger online presence.
The decrease in retail directly affects the demand of industrial real estate. Stores are relying heavily on e-commerce and domestic manufacturing to keep up with online sales. These businesses need space to store their products, which is why sales (in the industrial sector) surged in the beginning of the pandemic.
Shifting to multi-family, the spike in unemployment has forced some homeowners to move into rental units. According to a Globe St. writer, “Many businesses are now operating remotely so flexible shelter or renting versus owning remains desirable. Graduating students with high debt will most likely choose to rent because securing a mortgage remains challenging.”
Those interested in investment properties need to be cautious of buying during a pandemic. Make sure your net operating income is high enough to outlast the recession and keep its value. Our nation hasn’t hit the recovery phase quite yet due to many still on unemployment. But as long as you are aware of which phase of the real estate market cycle you are in, you’ll know what you can safely pay on a property
Barton K. Feinberg
Director of Brokerage, Real Estate Associate Broker
Some information contained in this article is from Forbes.com and connect.media