Even with 2020 ending, the effects COVID-19 has had on the commercial real estate market will continue to be felt into the New Year. There is approximately $126 billion worth of properties within this sector, including hotels, offices, retail spaces, and more. Many will see distressed prices going into 2022 as they sell.
We also see more mortgage delinquencies rising due to the pandemic as it remains unclear when some companies may be able to bring their employees back to work. Many are expecting some significant losses.
Before the Pandemic
Before the pandemic, the CRE sector was in a stable and strong position overall. However, after COVID-19 was declared a pandemic, financial markets worldwide began to decline, which affected commercial real estate. Businesses were being shut down along with trade activities.
Commercial Real Estate Operations
When it comes to lending in the CRE sector, markets have remained accessible, but there is an enhanced risk making lenders more cautious. Commercial mortgage-backed security delinquency rates have also moved up after seeing consistently low levels for the previous three years.
Some also face short-term liquidity management issues due to delays and increased costs for business. Many have applied for debt relief as a result.
New investments have also slowed down due to the uncertainty surrounding the market. This has led to approximately 74 percent of respondents shelving their CRE investment plans.
How to Recover
However, it isn't all doom and gloom as it may initially appear. With the pandemic, we have found ways to adapt. Many owners are now using technology as a way to enhance tenant engagement. Some are even turning to virtual reality to connect with shoppers at home.
Landlords and tenants have been working together to seek assistance, and many businesses are switching to remote positions and increasing their digital communication channels.
When you can come up with a structured plan, you can start moving back into physical spaces, even if it means complying with local guidelines for hygiene and sanitation and health and safety.
The Future of Commercial Real Estate
If you have the money to invest in a new property and you can afford to make the monthly payments, then now may actually be one of the best times to invest. Mortgage rates are at a historic low right now as well, and some lenders are even offering 30-year mortgages below the three percent mark.
Rental properties can provide you with regular income as the property appreciates. You can also maximize capital through leverage and find many tax-deductible expenses.
So, before you completely write off investing in commercial real estate, Contact the experts at Titan Lafayette Real Estate to go over your options and see what is available.
Remember, any kind of property, including commercial real estate, can prove to be a good investment if you focus on the financial reward of this investment and do a little homework ahead of time.