It all comes down to a vaccine: commercial real estate executives recognize the various challenges in the current market as a result of the COVID-19 pandemic, while remaining optimistic about future market conditions, according to The Real Estate Roundtable’s Q3 2020 Economic Sentiment Survey. The report emphasizes the importance for developing, testing, and distributing a vaccine in the coming months in order for market conditions to show further improvements.
“As our Q3 index shows, commercial real estate markets continue to suffer from the effects that the COVID-19 pandemic has had on businesses and residential tenants,” said Real Estate Roundtable President and CEO Jeffrey DeBoer. “Hospitality, senior housing, and retail commercial real estate tenants in particular are struggling currently, as are CMBS loan pools consisting of these asset types. Other commercial real estate sectors, notably office and multifamily, also are facing challenges related to the overall economic hit from the health care crisis and are very cautious in their activities.”
However, generally balanced CRE market conditions and responsible leverage prior to the crisis positions the industry to stabilize and move forward positively once a vaccine is available, DeBoer added.
The Roundtable’s Q3 2020 Sentiment Index registered at 42, a four-point increase from the previous quarter, as many respondents believe current market conditions are the result the pandemic rather than poor fundamentals. Survey responders expect a challenging market for at least the next six to nine months while a vaccine is created, tested, and distributed. Assuming a vaccine is released, most responders assume the market will be in recovery by this time next year.
“While a vaccine continues to be explored, it is imperative that Congress and the Administration soon come to an agreement on the next round of COVID-19 relief. Extending added unemployment benefits, additional funding for the Paycheck Protection Program (PPP), and a rental assistance program to help impacted people as well as struggling small businesses is needed,” DeBoer said. “Moreover, property owners, hospitals, schools and others need liability protection against frivolous lawsuits and businesses need assistance as they seek to cover new and unusual expenses related to safety and cleaning protocols.”