CRE in the Time of Covid-19

Over the past ten years, one question has loomed large in the minds of real estate investment professionals:  what will inevitably be the next event to slam on the brakes?  The good news is that we now have our answer.

 

For most of the past decade occupancy and rents have surged higher, cap rates driven lower, cheap debt has been abundant, and transactional volume and values have soared.  While certain submarkets and product-types may have looked wobbly at times, the overall trend since 2010 nonetheless has been onward and upward.   While we kept one eye on local employment growth and demographics, and the other on global debt and equity markets, it was never anticipated that a global health pandemic would trigger the sharpest economic downturn in living memory.

 

For property owners, the immediate concerns are two-fold, collecting rent and continuing mortgage payments. The Federal Housing Finance Agency (FHFA) has announced mortgage forbearance for all Fannie Mae and Freddie Mac backed multifamily properties. The forbearance is granted under the condition that evictions for renters who are unable to pay their rents are suspended for the time being. In addition, the stimulus aid for individuals should help in the short term with rent payments. While it is a challenging time for property owners as a whole, according the Wall Street Journal, rental apartment buildings and industrial properties will incur the least amount of market damage.

 

The short-term impact has been a sudden transactional freeze, as owners and investors seek to raise cash and reassess risk.  While this is uncharted territory, it comes as a relief to many that – once again – the challenge is not a reflection of underlying real estate fundamentals but rather the result of external factors.   While the current situation is devastating, there are ample opportunities for those playing a longer game.

 

Multifamily and commercial real estate transactions will continue to close, but only when buyers, lenders and sellers work together with increased flexibility.  In these current market conditions, the fate of any transaction rides largely on the professionalism and skill-set of the investment sales professional running the deal.  Our Guide to Choosing an Investment Sales Professional may be a useful tool in just such a moment as this.  For building owners and investors, now is the time for a truly collaborative and relationship-based strategy.

 

Since 2010, our award-winning team of professionals has closed more than 600 transactions totaling nearly $1.5 billion in value and has earned the trust of investors from New York to Boston and beyond.  As we enter our second decade, we are ever more committed to building long-term relationships and providing value-added advisory and transactional services to our clients throughout the Northeast.