What Is Coronavirus and How Will It Affect Commercial Real Estate?
Coronavirus is having a major impact on our lives and the economy. The practice of social distancing has become the new norm, forcing some businesses to shut down and many workers to work from home.
And according to Dr. Anthony Fauci, an immunologist, the Director of the National Institute of Infectious Diseases, and member of the White House coronavirus task force, it’s going to last for at least “several weeks.”
So, what exactly is coronavirus and how can we expect it to affect commercial real estate (CRE)?
Let’s take a look.
How will COVID-19 affect commercial real estate?
COVID-19 has already had a major impact on the economy.
In the United States, the Dow Jones Industrial Average has seen a significant drop in recent weeks, though it had a massive surge on Tuesday following an announcement that the Senate reached a deal for a $2 trillion economic stimulus package.
But each industry will have a unique response to this pandemic.
Here’s what we expect to see in CRE.
3 ways COVID-19 will affect commercial real estate
1. Technology adoption will increase
As many brokerages begin implementing work-from-home policies, they will increasingly rely on technology to collaborate internally and with clients.
Some solutions that will have the biggest impact are:
- Video conferencing platforms — These tools will allow brokers to maintain face-to-face contact with their team and clients without risking person-to-person transmission of COVID-19.
- Client relationship management (CRM) software — Cloud-based CRM platforms will empower firms to keep a system of truth that houses critical dealmaking data brokers can access, update, and share in real time, from their own homes.
- Virtual tour software — As in-person property tours dwindle, firms will look to software to help them create virtual experiences that allow clients to tour properties without physically visiting them.
2. Retail, travel, co-working, and hospitality will be hit the hardest
Social distancing is keeping people at home as much as possible, and some states have even enacted shelter-in-place laws that further limit movement.
Shelter-in-place laws, in particular, can be hard on certain industries, as they distinguish between “essential” businesses, which remain open, and “non-essential” businesses, which are forced to close.
While the distinctions vary from state to state, retail, travel, co-working, and hospitality organizations are generally considered non-essential.
Depending on how long these laws remain in effect, these businesses may be forced to make cuts or even go out of business.
3. Industrial will weather the storm
The industrial sector appears to be well-positioned during the COVID-19 pandemic, as e-commerce is seeing an uptick from individuals who are leaving their homes less and less.
In fact, Jim Cramer, Host of “Mad Money w/ Jim Cramer” and Co-Anchor of CNBC’s “Squawk on the Street,” suggests Amazon is benefitting from the viral outbreak.
The increased activity Amazon has seen has even led the company to temporarily prioritize “household staples, medical supplies and other high-demand products coming into our fulfillment centers so that we can more quickly receive, restock, and ship these products to customers.”
What is COVID-19?
Okay, so we know how COVID-19 will affect CRE, but what exactly is it?
COVID-19 is a novel form of coronavirus — a family of viruses that includes SARs, the common cold, and more.
According to the Centers for Disease Control and Prevention (CDC), COVID-19 is a “respiratory illness,” which “was first identified during an investigation into an outbreak in Wuhan, China.”
How is COVID-19 different from other viral infections?
COVID-19 is far from the first viral outbreak to cause an uproar. Many of us have lived through SARS, H1N1, and more.
So, what makes COVID-19 stand out?
To answer that question, Business Insider analyzed data from various medical authorities including:
- Johns Hopkins
- World Health Organization (WHO)
- New England Journal of Medicine
- Malaysian Journal of Pathology
- China Global Television Network
They concluded that while COVID-19 is less deadly than other viral infections, it’s also more widespread.
Why social distancing is important during this outbreak
Medical authorities across the globe are urging people to practice social distancing to mitigate the spread of the novel coronavirus.
Johns Hopkins defines social distancing as “deliberately increasing the physical space between people to avoid spreading illness” because “staying at least six feet away from other people lessens your chances of catching COVID-19.”
They go on to offer examples of social distancing that include:
- Working from home instead of at the office.
- Closing schools or switching to online classes.
- Visiting loved ones by electronic devices instead of in person.
- Cancelling or postponing conferences and large meetings.
Social distancing is important for two main reasons:
- How COVID-19 spreads.
- How the spread of COVID-19 affects hospital capacity.
How COVID-19 spreads
The CDC notes COVID-19 “is thought to spread mainly from person to person,” and it “seems to be spreading easily and sustainably.”
There have even been reports of individuals spreading the virus without displaying symptoms.
Social distancing limits person-to-person contact, which helps to slow the spread of COVID-19.
But why is slowing the spread so critical?
How the spread of COVID-19 affects hospital capacity
Slowing the spread of COVID-19 can help prevent an influx of patients hospitals don’t have the capacity to treat (and provide time for the medical community to get more supplies and develop new treatments).
According to John Hopkins, “A large number of people becoming very sick over the course of a few days could overwhelm a hospital or care facility. Too many people becoming severely ill with COVID-19 at roughly the same time could result in a shortage of hospital beds, equipment or doctors.”
By slowing the outbreak of the virus, medical experts hope to “flatten the curve.”
In the video below, the CDC explains this concept and why it’s important.