Covid-19 Pandemic Affects Entire Commercial Real Estate Market
The pandemic changed the world in early 2020 as the virus affected every segment of the real estate market. Social distancing and stay at home mandates had severe effects on real estate. Retail properties, hotels and motels, and leisure properties in general were decimated, while essential retail, medical offices, and warehouse properties for e-commerce companies did exceedingly well. Close to a half million people have died from the coronavirus so far, although deaths and hospitalizations have begun to slow down. The health crisis has caused employers to lay off some workers and force others to work from home. This has created a major demographic shift in the economy. This economic uncertainty has caused some households to search for less expensive housing, while others needed larger spaces for work from home and online school. Due to a reduction in commuting, more people left dense urban areas in favor secondary or tertiary locations. Public transit levels remain well below pre-Covid levels as fewer people are commuting to work. Higher unemployment levels and people working from home are causing more people to spend more time at home than ever. One positive benefit that we are seeing is a surge in new small business start-ups from people working from home.
The economy was relatively healthy heading into 2020. Corporate profits were high, and companies were sitting on a lot of cash. Throughout this health crisis, the money supply has remained liquid as the federal government has injected large amounts of cash into the economy with various stimulus measures including the Paycheck Protection Program and the CARES Act. In response to the coronavirus, the federal government also fast tracked several vaccines for emergency use. These immunizations are providing a path forward for the economy in general and the real estate market in particular. Although major uncertainty exists in the market in 2021, we remain hopeful that the real estate market will rebound in the near future.
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Author
Stephen A. Sobin is the President and Founder of Select Commercial Funding LLC. Mr. Sobin has over 35 years’ experience originating commercial real estate loans. He formed Select Commercial to offer commercial mortgage banking and real estate capital advisory services to his clients on a national basis. His goal was to become an advocate for his clients and to help them navigate the ever-changing economic conditions facing the banking industry and to assist them by providing access to commercial real estate funds despite the uncertainty of the capital markets. The company was founded on the belief that most small to medium sized property and business owners lacked the expertise and sources to obtain the best financing options in the $1,500,000 to $10,000,000 range. While large real estate companies often have in-house finance professionals, most small to medium sized borrowers do not have the same access to professional advice and sources of funds. Mr. Sobin focuses on providing those services to this segment of the market.