Covid-19 and the Commercial Real Estate Market

The Covid-19 pandemic has created havoc on Americans’ health and the health of their businesses. April 1st marked a major due date for rent payments for millions of businesses large and small, and reports from around the country indicate that many were facing great difficulty.

The President and state governors have been reporting daily on total Coronavirus cases and the current death toll, but there is no daily count of lost businesses. However, reports of unpaid April rent have greatly increased around the country, along with accounts of how landlords and tenants are trying to cope with the sudden collapse of a large portion of the American economy.

Most of all, they tell the story of the commercial real estate industry in turmoil, with businesses large and small feeling the pinch that some say could wreck the economy like the Great Recession of 2008. With many businesses shuttered, and homeowners out of work, landlords are having difficulty collecting rents and paying their mortgages and taxes.

There are several government and private business efforts starting up to help suddenly cash-starved businesses survive the pandemic, most notably the Paycheck Protection Program now available through the U.S. Small Business Administration.

That money, in the form of loans that many expect to turn into grants, is only beginning to be distributed, and 75% of each forgivable loan must go to payroll. That leaves only 25% at most to go to rent.  While helpful, this program will only provide a short-term solution to businesses and landlords.  Depending on the length and severity of shutdown, Congress will probably need to more to ensure the survival of small businesses and the economy in general.

The American commercial real estate market, like the economy it helps support, is a complicated mix of financial and business relationships that is now being tested like we have never seen before. Some businesses will fail, and others will find a way to survive. We will be watching the market very closely in the weeks and months ahead.  Please visit our website at www.selectcommercial.com for current information.