COMMERCIAL REAL ESTATE MARKET FLOUNDERS EVEN AS RESIDENTIAL MARKETS BOOM Steve Peterson
T
he housing market, in general, is a beehive of activities amid the pandemic. Thanks to the historically low mortgage rates and the current trends where scores are fleeing the cities for the suburbs. However, not all sectors of the housing market are red hot with housing activities. Commercial real estate, in particular, is suffering a different kind of blow from the COVID-19 pandemic. With the rise of Zoom and Slack platforms, and other productivity tools, it has become easier for people to work from home. On the other hand, online stores such as Amazon and other online retailers are ripping big amid the pandemic as the shifting from physical stores to online shops is accelerating.
”There will likely be less demand for commercial real estate due to the rising popularity of online shopping and working from home,” said Ivy Investments global economist Derek Hamilton in an email. Regarding that, corporates are laying off thousands of employees due to the plunge in operations. For example, Brookfield Property Partners (BPY), which owns malls and other shopping centers, including Tysons Galleria in Virginia, announced that it would lay off 20% of the 2000 employees in its retail arm. In an email obtained by CNN Business on September 22, 2020, Brookfield said, ”our business has been frustrated, interrupted and constrained” due to Covid-19 and that ”after thoughtful consideration, we have reached the heavy decision to reduce the size of our workforce.” Elsewhere, it’s not the entire commercial real estate market sector that is suffering; some parts are holding up well. ”There are lot of subsectors in commercial real estate,” notes Fernando De Leon, managing partner at Leon Capital Group, a real estate investment firm. According to De Leon, properties that house warehouses used by e-commerce firms are well cautioned from the economic pain. The case is the same for self-storage companies, as storage rents remain stable as people look to remodel their living spaces, he added. Moreover, “pharmacies, grocery stores and restaurants
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THE POWER IS NOW MAGAZINE | DECEMBER 2020
