Back in March when the country initially shut down due to the spread of COVID-19, it caused a massive nationwide stall. After ten weeks, we’ve had plenty of time to adjust to our new daily circumstances in terms of social distancing and sheltering in place. Investors have also had time to survey the everchanging economic landscape. Check out our recap of common sentiments being echoed by commercial real estate investors.
Investor Reluctance is Subsiding
Naturally, there was a large halt in investments throughout March and April. Since then optimism has started to grow once again due to reassurance from the Federal Reserve and the climbing stock market. Federal Reserve Chairman Jerome Powell shared just last week that the Fed has not expended all of its resources yet, and that lending programs and reduced interest rates could continue to play a large role in our road toward recovery.
The economic uncertainty of early 2020 and the decreasing quantity of available buyers has led to capitalization rates creeping up throughout the year. In the short term, experts predict that this will lead to some investments with longer return rates than the pre-COVID economy allowed. However, investors expect cap rates to settle back down in as short as three months as businesses begin to reopen at reduced capacity.
Expect the Unexpected
It is becoming clear that COVID-19 and its aftermath will be a part of our lives for months to come. For this reason, it’s safe to expect some turns and uncertainty in the real estate market. Some investors expect the economic downturn to last into 2021. Until then, we will likely continue to see businesses close their doors permanently. This may create investment opportunities at lower prices than previously possible. Throughout this time of volatility, it will be crucial to keep a close eye on bargain commercial investments that will prove to be very fruitful as the economy approaches a state of normalcy over the coming months.
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