Silver Linings to the Coronavirus Cloud
It’s been about a month since the Coronavirus Pandemic virtually shut down the commercial real estate market along with most of the rest of the global but I’m starting to get used to it. I didn’t say I liked it, but I am adjusting to this new reality after the initial shock of the the Stay-At-Home order and various other restrictions has become settled in. I have been mostly working from home while visiting the Vars Real Estate office to mostly pick up the mail, water the plants, and deal with some pressing business needs. Culver City and the County of Los Angeles have given some guidance regarding commercial real estate brokerage but most of the new rules are directed towards residential real estate companies. At first it seemed that commercial real estate brokerage was deemed a “non essential business” and we should work from home only. Then there was a clarification that “Property Managers and Leasing Agents” are essential businesses. Professional Services regarding sales and leasing transaction are also considered essential, but there was no explicit mention of commercial real estate agents and the most of the language seemed directed at residential agents since people need a place to live.
There are additional rules about showing vacant properties which is now allowed as long as there are no more more than one or two people present but quite frankly not too many people want to look at properties right now. Most business people are uncertain about their future in terms of finances and are not too interested in braving the risks associated with touring available properties during a global health pandemic. There are encouraging signs of the curve flattening and a phased-in approach to reopening the economy but no one knows how long that will take or what it will look like. Several of my colleagues and clients have asked me what I think will happen with the market and prices. Of course I don’t have a magic crystal ball, but I don’t see how commercial real estate sales prices or lease rates continue to rise like they did before. There is anecdotal evidence of desperate agents trying significant price cuts on existing listing but I don’t know how much traction that may be having in this paralyzed business environment. Most sellers and landlords realize that this is not a great time to find new buyers and tenants. If you were working on an existing deal, then maybe it still closes but a lot of properties are being temporarily pulled off the market or left “as is” until there is more clarity about the future. I predict that starting in May or June we will start to see a gradual return to the new normal in the business world and commercial real estate prices will start to gradually decrease. The depth to those price decreases will depend on a variety of factors but mostly how we as a society adapt to the new way of living which is the biggest unknown.
Americans, and Californians in particular, are a hopeful, innovative, and optimistic group of people. Whatever the new normal is will have some great new ideas along with some uncomfortable restrictions in the same way that the quarantine has. Rather than enumerate the negative implications of this Coronavirus Pandemic (the news media, government officials, and your paranoid friends do a fine job of that), let’s focus on the positives of the pandemic – the silver linings of staying home: clean air, less traffic, less sound pollution, spending time with family, time to teach your kids, older people and technophobes learning tech skills, time for things you don’t normally have time for like home improvement projects – cleaning out/reorganizing closets, rooms, garage. backyard beautification. catch up on reading, movies, and TV shows, cooking family meals, baking sweet treats, and try to make new dishes. Despite some strange dreams, many of us have been able to get more sleep than normal. Getting a proper night’s sleep has been scientifically proven to help the immune system. Another immunity booster is maintaining a proper weight and exercising regularly. Now that we are eating more home cooked meals we know exactly what goes into our food which has had a positive effect on many people’s diets. Life, for many of us, has slowed down which gives us the vital time to focus on our health. Society has collectively hit the reset switch, giving us time to think about what is really important in life and how to best care for our loved ones. I am optimistic that the this pause will eventually lead to a healthier and more prosperous world.