Don’t let the recent bad news about the nation’s commercial real estate market discourage you from investing during the COVID-19 pandemic. There are opportunities, according to industry experts like Paul Daneshrad.
It’s true what they say about 2020. The pandemic has hurt commercial real estate in significant ways. After the virus surfaced earlier this year all over the country, businesses were forced to shut down, some were forced to layoff workers and property values plummeted.
The news isn’t good for 2021 either, according to analysts who note ongoing economic struggles likely will continue to take a toll on businesses. Even as COVID-19 vaccines are rolling out across the country, the virus is expected to continue its impact with record-breaking new infections, hospitalizations, and deaths. And many cities and states are once again renewing shut-down orders, a move that also is expected to force more business closures.
It likely will be into the summer before any real relief is seen from the spread of the virus, according to public health experts.
All of that spells bad news for commercial real estate investors. But there are areas of the market that are seeing surprising growth even in the middle of the pandemic. According to Daneshrad, cold-storage warehouses, distribution centers, and remote workspaces are experiencing a boom, making them worthy investments for buyers looking for new opportunities.
The virus has changed the economy, as more people are staying home, grocery demand is increasing and businesses are rethinking how they provide workspaces. Over the next year, properties that serve this changing demand can expect to benefit.
Even before the pandemic, cold-storage warehouses were in demand, with a national vacancy rate of 10 percent. The temperature-controlled warehouses keep food cold and are needed to help meet the demand for short-term storage of perishable food and other supplies. The growth in the cold-storage warehouse market is expected across the globe as more businesses look for space to accommodate consumer and industry demand, according to Yahoo Finance.
Consumers also have shifted much more quickly to online shopping, sending the need for distribution center locations surging. The transition already was underway, as online shopping has increased in popularity in recent years. But the pandemic hastened the rate of growth, with a year-over-year increase of 46 percent reported in September. Retailers whose brick-and-mortar stars have struggled with sales during COVID-19 are expanding their distribution centers to meet the growing demand of online shoppers and to keep customers.
Employers also are changing the way they look at office space. As more workers have shown they don’t have to be at the office to be productive, businesses are looking at the options of ending leases for office space or selling their office buildings. The shift to new remote workspace options could serve owners of office space willing to change their lease arrangements. Some businesses will look for less expensive office space that offers employees a remote work option as an alternative to working from home, while other businesses will offer the option of working from home on a permanent basis to those workers who want it.
But there are some workers who may not have enough privacy at home to do their jobs, and they may increase the demand for affordable remote-work office space options.
Even with all the negative trends affecting commercial real estate veterans, there are signs of opportunity for those willing to serve the new demand created by the pandemic.