How Does Commercial Real Estate Make Decisions Not Knowing if the Virus Will be With us for Months, Or For Years?
In National Real Estate Investor June 2020 Elaine Misonzhnik writes on page 3, “The virus might be with us indefinitely. (The World Health Organization has predicted it might take up to five years to get it under control.) And to declare the end of cities, decide that everyone should work and learn from home permanently and opt to rely solely on curbside pickup for restaurants and retailers as viable long-term solutions would be just as myopic as reopening without taking any precautions at all. It would also be disastrous for commercial real estate. Scores of companies switching to remote working forever will mean a glut of empty office space. People avoiding stores for years to come will put even Class-A malls in the path to obsolescence. Ailing seniors remaining at home when they need around-the-clock care will result in more than just a hit on senior housing. It will put further strain on working age Americans, especially if they’ll already be helping their children with distance learning because physical schooling has been declared obsolete.”
A few weeks ago I might have thought what Elaine wrote to be overly pessimistic, and in my field I am surrounded by optimistic commercial real estate brokers, lenders, developers and other industry sub-segments. However, today, with 40,000 daily cases in the U.S. and states re-shutting bars and other businesses, seeing a strong sustained economic resurgence seems like an economic fantasy. The PPP runs out, unemployment will run out and we have gotten our country in trillions and trillions of additional debt. Now Europe has announced they don’t want us flying there, and to bring it closer to home, last night I called my local favorite pizza place, Papa Murphy’s, and the phone was disconnected. Then this morning I called my local Supercuts to get a long-awaited haircut, and again, another business has permanently shut down. We need to start thinking of this pandemic as long-term (1-2 years or possibly longer) and plan our business, social, and mental survival on this basis. If a miracle happens and we get out of this sooner, great! But if it does take years and not months, and we survive because we planned for this, we will all be ahead of the curve.
