Business Alert #1:
The Post-COVID-19 Commercial Real Estate Market
By: Michael M. DiCicco, Esq.
The industrialist and philanthropist, Andrew Carnegie said: “The wise young man…of today invests his money in real estate.” According to Mr. Carnegie more fortunes in the United States have been created through investment in real estate than any other business venture. How sage that advice remains in the post-COVID-19 era appears to be uncertain as the commercial real estate market seeks to regain its footing.
Prior to the Pandemic
Prior to the COVID-19 global pandemic, the commercial real estate market was in flux. The demand for office space was decreasing as more and more companies permitted telecommuting for at least a portion of the work week. Brick and mortar retail businesses were suffering because of e-commerce and an exponential increase in online shopping. Many large retailers closed their stores and began following the business model of Amazon by repurposing their businesses to obtain a greater share of the online shopping market. Like an accelerant, COVID-19 caused online shopping to surge and created new work rules that permitted full time work from home. These developments made the commercial real estate market even more unpredictable.
Governmental Shut Down Consequences
Beginning in March 2020 with the promulgation of governmental shut down and stay at home orders by Governor Murphy, owners and property managers began making health and safety upgrades to commercial space to ready the properties for safe reopening. Ultimately, the focus of owners and property managers shifted because the pandemic continued for far longer than many anticipated. As the pandemic lingered, landlords and tenants were faced with difficult decisions. Landlords were reluctant to begin eviction proceedings because of the uncertainty of finding new tenants. Tenants were unable to pay rent because their businesses were not operating. Tenants, however, did not want to lose their leases because they hoped to re-start business post-COVID-19. Because of COVID-19, the commercial real estate industry has suffered: vacancies are now at their highest level since 2014.
Commercial Real Estate Recovery
As the industry moves to recover, strategies may be put in place for property owners and tenants. Acquisition, redevelopment, and repurposing of properties designed to attract thriving businesses like warehouses, fulfillment centers, and medical and life sciences uses is prevalent. Lenders are anxious to fund these efforts. Both landlords and tenants seek to renegotiate leases and enter into new arrangements to address their needs in the post-COVID-19 era. Stated simply, the commercial real estate market offers opportunities for property owners and tenants alike.
Maggs McDermott & DiCicco has experience, legal knowledge, and strategic thinking to assist owners, tenants, property managers, and leasing companies on all issues involving commercial real estate. We represent these entities in financing, leasing, and other corporate transactions. We will help you navigate your course and position you to thrive in the changing post-COVID-19 commercial real estate market.