The Coronavirus Commercial Real Estate Los Angeles effect is unknown as of April 1, 2020, but we have some basic projections for short term and long term. In the short term, the COVID-19 Pandemic is hurting all financial markets with massive volatility and lots of uncertainty. China’s economy has taken a big hit and the global economy may suffer the same fate. Some sectors of the global economy may be permanently damages while others may benefit. There is growing downside risk in the stock market as investors struggle to price in the economic calamity. Central Banks are attempting to stabilize the situation and the United States stimulus package should help stabilize the US economy.
It’s fairly obvious to even the casual observer that there is instability in the global economy due to the worldwide Coronavirus Pandemic, but what does this mean for commercial real estate and particularly commercial property in the Los Angeles market? The commercial real estate market is slower moving and the leasing fundamentals are not as volatile as the stock market. If the COVID-19 Pandemic is short lived, meaning we can get back to a new normal by the end of May or early June, then the effect on commercial real estate prices should be minimal. However if the crisis last longer or has second and third waves, then commercial real estate will be affected negatively across the board.
Coronavirus Commercial Real Estate Los Angeles
The initial panic has driven many investors to the bond market which makes rates lower thereby creating better debt/refinance options for borrowers. Cheaper money should help lubricate the real estate market which could help prices rebound from a temporary drop. Based on the current modeling, California could emerge from this crisis by the beginning of the summer. Based on this assumption, many analysts are predicting a strong second half for 2020. That optimistic outlook remains to be seen but we can be certain that when we do emerge from this shock, the business world will be different. Hand shaking may be a thing of the past. Social distances may be here to stay. Technology in commercial real estate will continue to grow. Web conferences may replace many face to face meetings. Property showings may be conducted with Facetime, Skype, or Zoom. Docusign may replace in-person signings. Web-based listing and mapping services will continue to grow. New products will be invented that changes the real estate industry in unforeseen ways. We will get through this. We will adapt. On the other end of this crisis, we will be stronger and smarter.