- Retail: Retail will see a bifurcated reaction to this economic downturn. Storefronts selling consumer staples – like Walmart, CVS, and grocery stores-will thrive, while dine-in restaurants, for example, could remain closed for the foreseeable future.
- Hospitality: Unsurprisingly, hospitality has been decimated by the national response to the pandemic. CCIM Institute Chief Economist K.C. Conway recommends those in the sector ask themselves some basic questions. “For those that own hospitality assets and invest in that space, you need to step back and reflect on what brought you to that property type. Why? Where were you going into this particular period? The market had near record revenues per available room, average daily occupancy, and rental rates. … Whether I’m a hospitality REIT, hotel owner, or I’ve got properties, I want to negotiate with my lenders for some debt restructuring.”
- Office: The office leasing market is likely to suffer in the short-term due to COVID-19 as layoffs diminish tenants’ overall need for space and, in many cases, set aside expansion plans they may have had. In addition, tenants who remain in the market for additional space will have a difficult time touring properties. Office workers’ pushback against the open office environment is likely to accelerate, as illness is more easily transmitted in an open environment. Many employers already had recognized that in a competition to attract and retain top talent, squeezing workers into increasingly tight spaces was not a sustainable strategy. Now, an emphasis on social distancing and good health practices – continuing in some fashion even after the crisis has passed – may help reverse the densification trend, with less shared space and fewer workers per leased square foot.
- Multifamily: Similarly, the multifamily sector could see significant upheavals as unemployment rises. Business that are closed employ people who now will struggle to pay rent. It’s a similar situation to retail, only in this case the tenant is an individual or family who lost its source of income. Tellingly, Freddie Mac announced a nationwide relief plan for current multifamily borrowers and residents.
- Industrial: Industrial, meanwhile, is in a two-pronged situation similar to the retail sector. Grocery and medical items, for instance, are flying off the shelves, so properties in this supply chain are humming along. But other industrial sectors could be in store for tough times, depending on what areas of the national economy slow or stop.
Please feel free to be in touch with any of the V/T Commercial team to discuss the current state of the industry and what we may do to assist you as you weave your way through unknown paths.