Some comparisons to our last meltdown…

Some comparisons to our last meltdown…

Let’s ask ourselves ‘post-panic’- how bad is this meltdown and what’s our plan of action going forward?

We can all agree that due to the Covid-19 pandemic, commercial real estate prices are expected to drop! How much, where and what property types remains to be seen.… and it is predicted (ULI) that the overall volume of deals will drop – $275B in 2020 vs $588B in 2019.

But the silver lining with this ‘recession’ (thus far) relative to 2008 is the access to capital.

2020 CMBS will close an estimated $20 billion compared to the 2009 CMBS market when it closed only $3 billion. CMBS backed by the Feds is re-entering the market quoting and funding deals.

Fannie, Freddie, and HUD(223F) are quoting between 75%-85% LTC with rates as low as 2.60%.

Most Banks, Credit Unions, Insurance companies, and Bridge lenders are still active. Due to current uncertainty the underwriting standards are stricter.

Rent Growth— Industrial rent growth is expected to continue thru the COVID headwinds (around 2%) while Apartment rent growth is likely to fall by 2 percent this year, but expected to bounce back in 2021 and beyond

Retail and hotel assets are expected to suffer a price decline, while most property type values will return soon and market fundamentals will perform much better than they did during the 2008 meltdown.

In short, while the top-line economic impact of COVID-19 will be much worse than the global financial crisis, U.S. real estate market fundamentals and values are expected to fare much better.

But as a final thought—the virus has affected our lives to a degree that no one could have ever imagined. We have to recognize that life will be different post-pandemic and we will have to make adjustments and sacrifices in our lives – to remain out of harm’s way.

Philip Cohen | Principal

Email: pcohen@mansfieldequities.com

Office: 310-551-2903 xt 10

CA RE License #01735947