The Power is Now

State of the Commercial Real Estate Market in the Pandemic Economy

Downtown

With Steve Peterson

Like the general real estate market, the commercial real estate market has been through its extreme records in 2020. At The Power Is now, we continue to lead the conversation about real estate for home ownership, wealth building, and financial literacy for all. Regarding this, we bring you the newest show on The Power Is Now TV called the Commercial Real Estate Round Table. The show will be hosted by our able VIP Agent, Steve Peterson, CCM. Steve will be taking us through what is happening around the commercial real estate market every second and fourth Tuesday every month.

In addition to being the host of the show, Steve is the broker and owner of Infinity Investments, a commercial real estate brokerage and investment firm located in Oakland, CA. The firm specializes in the syndication, brokerage, and management of multi-family apartment buildings. Steve’s focus is on apartment buildings, as well as office and retail property.

Where are we at in the commercial real estate market?

In the Commercial Real Estate Round Table that took place on October 27, Steve gave an overview of what has been happening in the commercial real estate market amid the pandemic.

According to Steve, unlike the residential market, commercial real estate is in a little bit of a holding pattern as properties are not flying off the market like they a year ago. Investors in the commercial real estate market are more cautious during these pandemic times. “I don’t see a lot of panic; I see a lot of caution in the market place,” Steve says. “Which after what happened during the Great Recession, it makes a lot of sense to be cautious about what you’re going to do.”

In some states such as California, things are shifting in the commercial real estate market. Many businesses are shifting their business models in terms of how they are doing business amid the pandemic. “You’ll find like people needed 20,000 to 30,000 square feet, whereas now they only need 5,000 square feet to operate their businesses,” Steve says. “Maybe they don’t need that much anymore.” Things are shifting relating to how businesses and apartments are operating, how the payment flow and the working out of that will happen.

“So I think we’re in the state of flux more than anything else,” Steve states. Steve argues that no one feels as if there’s going to be a crash like in the Great Recession from the look of things. This is because the market has seen people putting a significant amount of money into deals and lenders underwriting loans for the past few years. “So, I don’t think there’s going to be a massive exodus of people abandoning properties.”

“I do think there will be many situations and circumstances where creative financing and negotiation skills are going to come into play when you think about doing a business in the future,” Steve states. “I don’t think we’re going to see a big crash.”

The most affected sectors.

The pandemic has had varied impacts on different sectors in the real estate market. According to Steve, some of the most affected sectors are the retail sector and hospitality. Office properties have been impacted differently depending on whether the offices are home to essential services. Apartments and industrial properties have not been so hard since most of them have been operating.

Repurposing of properties.

Repurposing properties has been a great way to build wealth throughout the history of real estate. Even before the pandemic, repurposing was already going on. But the trend of repurposing properties is likely to surge as the COVID-19 pandemic persists and has already shifted the whole economy from the way it was operating, according to Steve. As the pandemic persists, we expect to see a huge shift as retail and office spaces are being repurposed to residential apartments and other special-purpose uses such as housing the homeless.

In California, where we have the highest population of homeless people, the state is already repurposing motels and other spaces to temporarily house the homeless, which could be permanent places for the homeless.

Lending in the secondary market.

Typically, lenders love apartment buildings more than other sectors, according to Steve. This is because whether we’re going through good times or tough times, people still need somewhere to live. However, the current situation is somehow different. Lenders have enacted a higher debt coverage ratio. This means that lenders are requesting higher amounts of one’s net operating income to cover their annual debt service to reduce the risk involved.

You can watch the whole show here.

At The Power Is Now, we’re committed to keeping you up-to-date with what is happening around the real estate market across the nation. Stay updated with any developing real estate market news by regularly checking our blog page at https://www.thepowerisnow.com/blog/. We also continue to advocate for advocate homeownership, wealth building, and financial literacy for low to moderate-income and minority communities. In this regard, we have a team of professional realtors— VIP Agents stationed nationwide to help you with anything you need in attaining your homeownership dreams. You can get in touch with the VIP Agents at https://www.thepowerisnow.com/vipagentsservices/. If you can’t find an agent from your area, you can contact me directly for a referral. You can also set up an appointment to speak directly to me at https://calendly.com/thepowerisnow/ericfrazier.    

Disclaimer: The views and opinions of Eric Lawrence Frazier are his own and do not necessarily represent First Bank or any organization affiliated with Eric Lawrence Frazier, or the Power Is Now Media Inc. First Bank is an Equal Credit Opportunity Lender. Eric Lawrence Frazier, MBA, is also a Vice President and Mortgage Advisor with First Bank. NMLS#461807 and a California Licensed Real Estate Broker DRE# 01143482. Email: Eric.frazier@fbol.com. Ph: 714- 475-8629.

Eric Lawrence Frazier MBA

President and CEO The Power Is Now Media Inc.

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