As a commercial real estate investor, it is important to be prepared for crises and to understand the impact they can have. Those who have weathered storms, like the Great Recession, may already have some understanding of what to expect from a marketplace impacted by a crisis like COVID-19.
However, there are a few things that make the post-COVID-19 world, especially the commercial real estate industry, very different. Learn what these differences are so you can be ready for your next commercial real estate project.
Breaking Down Commercial Real Estate
Commercial real estate can be broken down into categories based on its asset price as well as by the type of property, such as whether it’s for retail, hospitality, industrial, or office use.
Different areas of the commercial real estate industry have been affected in different ways during the COVID-19 pandemic and will continue to display different signs of the pandemic.
The Four Types of Commercial Real Estate
Perhaps as most people would expect, the two industries that have been impacted by the pandemic the hardest have been retail and hospitality properties. However, it is not universally true that all retail and hospitality properties are faring poorly.
While some businesses have seen decreased sales or even had to temporarily close due to COVID-19, others, like grocery stores, have seen steady sales. Likewise, while hotels catering to high-end clientele such as those traveling for business are seeing lower numbers, others such as limited-service hotels are doing much better.
Among the areas that have seen the least amount of impact are multi-family properties and industrial properties. Rent collections at multi-family properties have remained high. Meanwhile, industrial buildings such as those used to store and ship packages for online purchases have seen little to no impact.
When looking into your next commercial real estate venture, it’s important to take a deep look into what type of commercial real estate you want to invest time and money into, especially as rules and regulations around stay-at-home orders shift and vary by state.
Out of Office: How COVID-19 is Changing Office Spaces
Perhaps the area that has seen the most discussion, which may be an area of particular interest for a commercial real estate investor, is the standard office building. During COVID-19 many office workers began working from home to comply with stay-at-home orders, and it is expected that many more businesses will begin to make the change to having more of their employees work from home permanently to save costs.
However, nobody yet knows if the reduced need for office space will be permanent or if it is only a temporary change before there is an increase in the need for a standard workplace environment.
Another point to keep in mind is the emphasis on social distancing which will likely prevail throughout the next few years. As a result, there may be a need for more square footage in an office space even with fewer employees going into the office in order to comply with social distancing recommendations.
This could translate into many other areas of commercial real estate as well, though it is still difficult to see if this is a trend that will continue on into the future or if it too is only temporary.
Overall, it is important to remember that now is still a great time to invest so long as you are aware of the current marketplace. While there are many aspects of commercial real estate that have been deeply affected by the COVID-19 pandemic, there are areas, like industrial, that have surpassed expectations.
Your Partner in Your Commercial Real Estate Journey
At Bay Mountain Capital, we consider ourselves partners in your real estate journey. If you’re unsure of your next move during this time, feel free to contact us for advice.
We’ve weathered many storms, including the Great Recession, and we can help you forecast your next real estate success! Reach out to us today or fill out a quote request to get started on your next commercial real estate project.
About Bay Mountain Capital:
Bay Mountain Capital has been in business for more than a decade, closing approximately 2,000 loans. We specialize in financing all types of residential and commercial property investments throughout Texas and Georgia. Using common sense and value-added approach, we strive to incorporate these principles into our underwriting and closing processes.
As a direct lender, Bay Mountain Capital can close a loan within one day after receiving a complete file and clear title. The process generally takes two weeks for a residential loan but can be accelerated where circumstances require it.
We are primarily an asset-based lender, which means that qualification requirements are limited. Our rates and fees are among the lowest in the industry.