How a Pandemic Impacts the Real Estate Industry
When the COVID-19 illness began sweeping across the U.S. in late December of 2019, no one could have predicted how vast the effects would be in every sector of the economy, not to mention social life. Coronavirus, the chemical virus that causes people to suffer from the illness that has officially been labeled “COVID-19,” has already infected hundreds of thousands of U.S. residents.
In March, several state governments, along with the federal government and the Centers for Disease Control (CDC), issued “social distancing” guidelines and shuttered many businesses. In order to understand how COVID-19 affected the real estate market and to get a glimpse of the impact of COVID-19 in Dallas, it’s necessary to look at each sector of the RE market.
Some geographic areas have been hit harder than others, for example, and particular segments of the real estate market have also been affected more more deeply that other segments have been hit. In general, real estate has already shown widespread effects of slowing, resulting from mandatory business shutdowns and the fact that millions of workers are doing their jobs from home.
Real Estate Sectors Feeling the Deepest Effects
Apartment rental, home sales, retail rental, and several other pieces of the RE market were among the first to see financial effects of the virus. However, any real estate activity connected to travel and tourism felt the quickest and deepest business downturns. The following sub-categories continue to feel severe economic slowdown that will continue at least for several months after the worst part of the pandemic passes:
- Cruise ship business and related bookings
- Bars, pubs, and restaurants who use rented retail space
- Amusement and theme parks, vital economic lifelines for many communities around the U.S.
- Business conference and meeting centers, either stand-alone facilities or ones connected to hotels
- Hotels, particularly properties that cater to vacation travel
- Gaming casinos and all retail shops under their collective roofs
- Sporting venues in every major city, whose seasons have been cut short
The impact of COVID-19 in Dallas and other major cities is ongoing, and actually worsening from day to day. However, cities that are not considered “resort” hubs, like Kansas City, St. Louis, Memphis, Atlanta, and others, are generally feeling less of a financial blow. The larger “international port” or resort cities, including Houston, Dallas to an extent, Phoenix, and San Francisco, are already experiencing historically low commercial rental rates and new home sales.
Timing Is Everything
The current crisis is a reality that can be measured in terms of distinct parameters like new home sales, commercial occupancy rates, the price of building materials, orders for new construction, and so on. What can’t be measured with any certainty is how long the recovery will take.
Some experts think that sectors like retail rental will bounce back almost immediately once stay-at-home directives and social distancing guidelines are lifted. Some even think the bounce-back will be quite strong and reflect a pent-up consumer demand for services like dining out and attending live sporting events. There are many reasons to be optimistic for the U.S. economy in situations like these.
Factors that indicate there will be a fast and solid comeback of the real estate industry after the crisis include the following:
- Most sectors of the real estate industry were quite healthy before the crisis began
- Resort and tourism sectors have the ability to turn on a dime, and could almost instantly revert back to their previously healthy conditions
- In all, the crisis cold end up lasting for less than six months
- Many business owners and individuals will consider real estate as a prime opportunity for investment when prices are at all-time lows.
Is There an End In Sight?
Fortunately, even the most pessimistic economists who have weighed in on the crisis note that things could turn around very quickly once the virus threat passes. In China, for example, the two cities hardest hit have already seen the retail business and rental sectors bounce back with a vengeance. That’s good news for major business centers in the U.S.
At Macy Newman, we’re ready to work with clients who need to identify appropriate commercial real estate space on a moment’s notice. It’s a fact that the impact of COVID-19 in Dallas has been profound, but the crisis won’t last forever. When the stock market begins to bounce back, as it always does after a crisis, and when the majority of workers return to their offices, companies will once again be seeking an experienced partner in the real estate market. Macy Newman stands ready to be a part of the solution when the worst part of this national crisis abates. Feel free to call us and discuss your needs at any time.
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We hope you found this inforgraphic on the Impact of COVID-19 on Real Estate Industry useful. For more tips, check out this one blog Airbnb Hosting Guide: 7 Things You Need to Know Before Listing Your Property for Rental.
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