Real Estate in COVID-19
This has been one of the hottest topics during the COVID-19 pandemic. During the first four weeks of shelter-in-place, I provided my view on the future of the housing market amid coronavirus pandemic. Here are some updates on both commercial and residential real estate sectors:
- Commercial Real Estate
First, the bad news: commercial real estate has been harshly impacted by the coronavirus pandemic. Small retail tenants were affected by the shutdown and many are being kept afloat by the Paycheck Protection Program (PPP) and the Economic Injury Disaster Loan program (EIDL) by SBA. Most of these tenants cannot afford to continue paying their rents but they are not able to get out of their leases either. At the same time, larger retailer tenants also applied for the PPP and many of them sent attorney-drafted letters to notify their landlords that they will no longer be paying for their rent payments declaring force majeure. If that’s not the worst, California proposed Senate Bill 939 which allowed commercial tenants in California to not pay rent for an indeterminate amount of time. However, with the strong opposition from landlords and land attorneys stating the proposed bill unfairly put the entire financial liability on the landlords, it did not pass the Senate appropriations committee.
- Residential Real Estate
The initial slowdown in residential real estate activities was essentially caused by a deliberate effort to control the spread of COVID-19 which halted many home showings. As a surprise to many, the residential real estate market (one to four units) mounted a record increase of 44% in pending home sales activities in May after a two-month decline due to COVID-19. In the San Francisco Bay Area, they have over a 67% increase in sales activities over five counties in June 2020 compared to May 2020.
Several factors led to increased homes sales: the record low mortgage rates and the pandemic altering home value to buyers. Over 35% of the homebuyers are demanding a new floor plan which allows for more rooms and separation, as well as bigger yard space. Work-from-home shows that living close to the office has become less important. Many experts have projected home prices will continue to increase for the next two years.
Topics: Real Estate Investment, COVID-19, Commercial Real Estate, Residential Real Estate
Work cited: Forbes, July 24, 2020
If I can help in any way please let me know, [email protected]. Stay Safe & Healthy.
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