Coronavirus impact on real estate during the pandemic
The real estate industry touches on every type of land, regardless of its usage. Therefore, to understand the effects of the COVID-19 pandemic on real estate, it is essential first to understand the sectors within the real estate itself. This includes residential real estate, commercial real estate, industrial real estate, and other land usage, such as farms and empty lots.
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Commercial-Residential real estate
The pandemic has substantially affected the value of residential real estate in many areas. As COVID-19 regulations have caused many businesses to close down, sometimes permanently, many have lost their primary source of income and long-term economic stability. This ultimately means more people have suffered financial hardships that will deter them from investing in property in the near future, even after the pandemic subsides. The lasting effects of this problem will likely depend on the duration of the pandemic, which is yet to be known.
However, commercial real estate has likely taken the hardest hit among real estate sectors as the demand for these locations and the ability to afford them have dramatically decreased. As many businesses are closed or restricted to certain hours, it has become more difficult for them to maintain their rent and mortgages. A similar issue has also arisen among those who rent residential properties, as many renters have lost at least a portion of their ordinary income in some respect. This means the value of commercial spaces has gone down. This issue is unlikely to remain a significant problem after the pandemic, as many businesses will return when COVID-19 restrictions are lifted and the economy begins to recuperate.
As we mentioned above, S&P Global's experts also have the same opinion about the commercial real estate in post-covid world. The pricing will be manipulated by the interest and fear of pandemic.
Smaller sectors
Despite being one of the smaller sectors, industrial real estate is perhaps faring better than you may expect. This sector accounts for properties like warehouses, offices, and manufacturing-related work. With the boom in eCommerce accompanied by lockdown and stay-at-home measures, many warehouses related to this field have been able to excel during this period. However, other industrial spaces, such as manufacturing, have reduced operation due to a smaller workforce and decreased demand for their products.
Land Usage also got a hit
The last sector relating to miscellaneous and niche properties, known as ‘other’ land usage, has varied depending on their field. For example, agriculture has experienced a minor reduction in operations because of a decreased demand in their commercial customers, such as restaurants. Although this has become evident in the form of reduced revenue, this is another effect of the COVID-19 pandemic that is expected to be temporary. After the pandemic subsides, this sector will likely revert into a close approximation of its previous state.
The future of the real estate industry is as varied as its many sectors. Where some are expected to grow during the pandemic, others are expected to suffer losses. Thus, accounting for all industries, the real estate industry as a whole is currently in a precarious position. But ultimately, the real estate industry is historically known to be dependable and stable, so a full recovery in many sectors may very well occur after the COVID-19 pandemic.
Interesting & short video about the different types of Land Use around the globe!