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How is Covid Affecting the Commercial Real Estate Industry

As the Covid-19 pandemic spread all over the U.S., it’s impacted the commercial real estate industry by delaying construction, reducing operating income, and increasing health risks for employees and customers.

Challenges Resulting from the Covid-19 Outbreak

Since the pandemic began, the real estate industry went from one of the most lucrative to one of the most uncertain. Many service providers are facing the challenge of mitigating health risks for both customers and employees, while developers are struggling to acquire permits and suffer from delayed or completely halted construction, along with reduced rates of return. At the same time, asset operators and owners are suffering from reduced income and are increasingly concerned about tenants’ ability to cover leases.

The assets that have seen the most damage appear to be facilities that house many people, whether they’re patients, consumers, guests, or residents. Real estate such as healthcare facilities, malls, student housing, and lodging have been hit hard, while locations with fewer people involved such as industrial facilities and self-storage businesses are withstanding the effects of the virus. The impact on businesses that rely on people comes as no surprise—people are avoiding gathering in locations with large crowds, and potential buyers are less inclined to own and operate these properties as a result.

How Real Estate Owners and Operators are Coping

Professionals in the commercial real estate industry are considering some of the long-lasting effects that the virus could have on the industry and how they’ll need to adapt.

For instance, the long-term trend of creating open-plan layouts and densifying could change dramatically as building codes change to prevent the spread of illnesses in enclosed spaces. Many older individuals are also likely to spend more time at home, even as they approach the age when they may want to consider moving into an assisted living facility. Ultimately, the virus could change the architecture of commercial buildings and the behavior of occupants.

More people are also turning to virtual communications to conduct business, and consumers are utilizing e-commerce platforms more frequently because of their convenience and affordability. The reliance on e-commerce could lead to more permanently altered buyer behaviors, placing more demand for industrial facilities over commercial retail locations.

In an attempt to mitigate the challenges that the pandemic has presented, industry leaders are continuing to do what they can to diversify revenue sources, rely on more digital strategies, and ensure that tenants are consistently satisfied.

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