“There will likely be less demand for commercial real estate due to the rising popularity of online shopping and working from home,” said Ivy Investments global economist Derek Hamilton in an e-mail.
According to an internal e-mail obtained by CNN Business Tuesday, Brookfield said “our business has been frustrated, interrupted and constrained” due to Covid-19 and that “after thoughtful consideration, we have reached the heavy decision to reduce the size of our workforce.”
Parts of the commercial real estate market holding up well
“There are lot of subsectors in commercial real estate,” notes Fernando De Leon, managing partner at Leon Capital Group, a real estates investment firm.
De Leon told CNN Business that properties that own warehouses catering to e-commerce companies are well insulated from the economic pain. So are self-storage companies, he added, as storage rents remain stable as people look to rework their living spaces.
Pharmacies, grocery stores and restaurants with thriving takeout and delivery businesses are doing particularly well, DeGiorgio said. “The lights are slowly turning back on,” DeGiorgio said. “People may be anxious to go back out, go shopping and eat out again.”
But it’s definitely a case of haves and have nots when it comes to in commercial real estate. Many hotel, office space owners and specialty shops are struggling.
Kaufman said that many big tech companies, which have done well during the pandemic, are still committed to having people come to physical offices occasionally instead of doing all work remotely.
“The complete elimination of offices is not happening. Many companies realize they still need them even though demand may be softer,” he said. “It’s not all doom and gloom. It’s an adjustment.”
More aid from Washington needed
Powell noted that many commercial real estate firms are unable to take advantage of low interest rates to borrow more money due to legal obligations in their debt covenant agreements. That means that some businesses are unable to fully take advantage of low interest rates, as homeowners can by refinancing.
There is some hope that Washington will do more to help commercial real estate.