The COVID-19 pandemic has forced us to change the way we operate both socially and economically. Social distancing mandates, business closures, and job losses have affected several industries, including commercial real estate.

While some changes have not caused extensive changes, several others have changed the market trajectory of commercial real estate investment altogether. In this article, we want to briefly address the pandemic’s impact and explore the direction the industry is now moving.

How COVID-19 has Affected Commercial Real Estate

Although the pandemic has affected the commercial real estate industry in many ways, the following have been the most notable changes.

1. Losses Due to Rent Payment Delays

Business closures and job losses made it difficult for many people around the USA and in Rio Grande Valley to make rent payments on time. The payment delays, in turn, affected commercial real estate owners and investors, cutting their earnings.

2. Increase in Uncertainty for Commercial Real Estate

The absence of COVID-19 data in 2020 resulted in uncertainty about the future of the economy, business, and essential societal elements. Although the vaccine has helped reduce this uncertainty, it is still fluctuating due to emerging variants.

These fluctuations make it difficult to predict future movements to make the right investment decisions.

3. Impact of Social Distancing Mandates on Malls, Hotels, etc.

Social distancing mandates have had the worst impact on the hospitality industry due to travel restrictions and malls. Malls promote indoor gatherings and can quickly become the center for disease spread without adequate measure.

As a result, customers for both commercial real estate types have dwindled.

4. Reduction in Transaction Volumes

Commercial real estate brokers and experts have noticed a significant drop in the total number of transactions within the industry, slowing down its regular business flow. Furthermore, uncertainty around the sector makes it difficult to predict future trends.

Changes in Demand Patterns

In addition to the pandemic’s negative impact, there have also been a few changes in the demand patterns to match the current situation.

1. Shift to E-Commerce

E-commerce businesses have boomed during the pandemic, causing an increase in demand for improved warehouses and related services. Since this digital integration will likely remain popular in the long run, making the correct investment now can generate profits.

2. Changing Preferences for Offices

Previously, offices were focused on developing more gyms, better cafes, but with COVID-19 limiting indoor work, many have shifted to an alternative. Office tenants are looking for more open space and safer distances between each cubicle to abide by social distancing regulations.

3. Higher REIT Indices for Data Centers

Interestingly, while REIT for malls and hotels has plummeted, The REIT indices for data centers, industrial needs, and cell towers have increased. Therefore, it is currently better to invest in relevant industries.

Final Thoughts

To sum up, the commercial real estate industry has been affected by the uncertainty and the overall economic impact of the pandemic. However, there are also some changes in demand patterns that have increased demand for some types of commercial real estate. These changes have reduced the burden of the general downturn on the industry.

If you want to start investing in commercial real estate but feel uncertain due to the pandemic, get in touch with us. CHRE has years of experience in commercial real estate and Rio Grande Valley, and we will help you find the profitable options for commercial real estate investment.