On Wednesday, March 25th four leaders from the Commercial Real Estate Industry gathered to discuss what they are seeing as challenges and opportunities, within the verticals of the commercial real estate industry. Bruce Westling with Newmark Knight Frank, Jeff Hoffman with Cushman & Wakefield | Boerke, Patrick Gallagher with CBRE and Scott Welsh from Colliers International had a candid conversation regarding the effect of COVID-19 on their business, their industry verticals, and their thoughts on what happens next as the economy tries to heal.
To watch the entire webinar click HERE.
Retail itself covers such a wide range of business, but Bruce is really looking to see a cooperative effort between landlords, tenants and lenders for our local retailers and restaurants. With zero revenue or a modified business plan (doing take out), we really need to do everything that we can to work together and help these people. Other retailers both large and small are also going to be in a major predicament. The staffing and layoff effect is significant across the board. The relief from the government will be very important whether that is related to stimulus, debt deferral, or loan forgiveness etc.
On the industrial side of commercial real estate, most industrial occupiers and tenants have been given an exception to keep working in Wisconsin. Overall, long term this could be a net positive impact on industrial real estate. This pushes the notion that we need to bring the supply chain back in the US and not rely as heavily on other countries. Statistically the industrial market is going to look favorable, driven in the short term by e-commerce and logistics. He does anticipate that long term capital expenditure planning and new facility builds will be on a major hiatus. They are not hitting a panic button on their side yet…he feels that most industrial owners have liquidity to weather the storm.
Office buildings currently have very few employees operating out of them, with skeleton crews managing them as people follow the Governor’s orders to stay home. At this point, the office sector is not seeing as big of an impact as retail, but April numbers will provide greater clarity. Scott said what remains to be seen is how long we have to hit the pause button on doing deals. Everyone hopes that this is a V-curve and that the recovery will be as strong and as quick as the downfall. Facilities maintenance has remained busy and construction has been a relatively seamless transition. Inspections may be one point that need a little creativity to accomplish their tasks. Scott is optimistic that we will be sharper and smarter at the end of this.
This economic dip is much different than from others in history, as this is driven by fear. Most capital providers are expecting a V-shaped recovery that will explode with demand as the economy begins to heal. There is a heavy focus on how to deal with tenants inability to pay rent (largely affecting retail and multi-family) but this will have a ripple effect across all property types and April will be very telling. There is talk of deferred payments for both rent and debt service: perhaps interest only payments, halting evictions etc. Economists feel that this will be a strong V shaped recovery and while the second quarter will experience a major dip in GDP, the third quarter should recover strong.
Key takeaway: Those who can communicate and communicate effectively will be well positioned at the end of this and the role of advisor is ever more important with the state of the industry.