Are New Pandemic Variants Cause for Alarm in Commercial Real Estate?
Specializes in providing actionable insights into the commercial real estate space for investors, brokers, lessors, and lessees. He covers quarterly market data reports, investment strategies, how-to guides, and top-down perspectives on market movements.
The pandemic is nothing new at this point — we’re over 18 months into it, yet life is beginning to go back to something that feels close to the normal we used to enjoy. People are not only going back to work, but declaring a preference for the office over the ten-second commute of a home setup. Concerts are back with a vengeance, and plenty of people feel that this is the best time to go back to pursuing the entertainment that they’ve always wanted in the first place.
As the pandemic continues, the primary virus’s variants, such as Delta and the new Omicron, have come out into the public consciousness. However, that does not mean that every variant is as deadly as the original virus. The current variant, Omicron, shows signs of being still contagious, but nowhere near as deadly as the first virus strain was.
This is a great sign, as it means that people will be able to build a resistance to this virus and get back to normal activities faster than in the past.
Looking at the Bigger Picture
Savvy investors need to study commercial real estate news with a careful eye. It is no secret that at the beginning of the pandemic values plummeted as foot traffic came to a stop and many consumers opted to stay at home instead of enjoying their usual shopping opportunities.
State quarantine rules also came into play. In places like New York City, you couldn’t go out, which meant demand for the normal aspects of New York City life also fell dramatically.
Now Is the Best Time to Explore Commercial Real Estate
Perhaps it is optimistic, but we will say this: Now is the best time to explore commercial real estate options. Commercial real estate news will vary by outlet. While there are plenty that are pushing the doom and gloom aspect, there are also those that are somewhat optimistic about the future.
We need only look at history to see that commercial real estate news is all over the place. In 2008, there were plenty of news outlets that were nervous about expanding CRE holdings, but the market recovered.
Do You Know What a Good CRE Property Looks Like?
If you’re looking at CRE listings available, you may be amazed by the sheer number of offerings in your local area and beyond. As mentioned earlier, the world is looking to get back to normal but many property owners have put their buildings up for sale in order to obtain capital for other projects or to exit the real estate business entirely.
Do you know what a good CRE property looks like? It’s about looking at the underlying fundamentals, as well as what you can do with the space to make it even more profitable than before. While you may be looking at listings that aren’t as expensive as they were three years ago, that doesn’t mean everything is a bargain.
It’s very important to look at the location as well as the traffic pattern around a building. A building that looks promising may become a problem based on how difficult it is to get in and out of its parking lot, for example. Finally, checking out the local commercial real estate news in the area is also a sound tactic.
Tips for Planning Your Commercial Real Estate Purchase
There are several key points to keep in mind when you’re planning for your first (or next) commercial real estate purchase. We’ve included these points below:
- Have a strong reason behind every potential purchase. Do you know what you want to do with the property?
- Crunch the numbers properly. What type of expenses are involved with the property? What are the zoning restrictions? Don’t chase a deal to the point you forget the numbers have to make sense.
- Prepare for unexpected repairs. Even the newest properties can have issues hiding under shiny surfaces.
- Line up your financing/cash reserves. Do you have enough financing for the purchase that you’re potentially interested in?
- Have a lawyer get involved in your purchase. You will never regret having your own professional involved, as they’re focused on your best interests, not the seller’s.
These tips should be the baseline for all of your real estate transactions, not just CRE transactions. While some buyers are lured in by the promise of big profits, proper research and restraint trumps rushing in on a deal.
Other Considerations to Make for Future CRE Purchases
It can be stressful to enter the CRE market with so much uncertainty. Yet it’s important to truly step back and look at the bigger picture. The best part of real estate is using resources that aren’t infinite in order to not just change your life but to impact your community as a whole.
Shopping centers, storefronts, warehouses, car washes, hotels, and more all form the face of commercial real estate, giving you plenty of chances to diversify your investment portfolio while giving back.
When business operations begin to get rocky, it creates opportunities for investors that are willing to take risks. After all, real estate is something that moves in cycles. What goes down eventually goes back up. We saw this in the 2008 recession, and we are seeing it again as the country gets back to pre-pandemic life in many aspects.
If you’ve been waiting for "the right time" to invest more in real estate, look at these uncertain times as an opportunity. You can take a property that would otherwise remain vacant and turn it into an important piece of your local community again.
Ultimately, You Shouldn’t Worry (Too Much) About New Variants
Ultimately, new pandemic variants aren’t a reason for alarm as long as investors are willing to understand that we get new information every single day. This is an ongoing situation, but the reality is that business must go on. The world cannot come to a stop because of the pandemic’s variants.
Higher rates of vaccination and a true desire to return to normal are driving not only people back to their pre-pandemic spending, but they’re creating a demand for business owners of all stripes to step in and provide services and venues.
While there is indeed a need for caution, there is no need for true alarm and panic.
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