There are many people talking about the economic impact of COVID-19. One of the most prominent topics is real estate, since it’s such an important part of our economy. How will the pandemic effect the real estate market? With unemployment dropping to historic lows, it might be assumed that residential real estate is ready to crash. But people will always need a place to live, so that decline might be dulled at lower price points.
Commercial real estate, like storefronts and office space, may be in big trouble. We are currently in the middle of a hurricane. People and businesses are living week to week, just trying to survive. But once the rain stops and we go outside, we may realize that life as we know it is about to change dramatically.
Businesses have been losing a lot of money during this health crisis, as many cannot provide the goods or services they do in normal times. To make up for this revenue loss, they may cut costs or even close down altogether. That means storefronts might be shrinking or disappearing. Demand for that commercial real estate will almost certainly decline.
For businesses that are able to hold on and keep going, many have and will shift their business model to pickup and delivery. People have already become more comfortable shopping online than browsing in a store, and that transformation has accelerated during the pandemic. Again, this means the demand for retail and commercial space will be on the decline.
Many white-collar workers that have simply shifted to a work-from-home model, may now realize that they have survived without the office setting and can stick with that moving forward. Office space no longer needed, costs reduced. Workers happier, and more money in the owners’ (or stockholders’) pockets.