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Perspectives on the Impact of Covid-19 on Real Estate Investments

With little warning, COVID-19 has quickly impacted the lives of most people on the planet and led to growing uncertainty that has greatly impacted the financial markets. How should real estate investors react to the current state of affairs and develop appropriate short and long-term strategies? We would like to offer several perspectives to guide our clients and readers.

1. Before you change lanes, first look at the rear-view mirror.

While history cannot be fully counted on to predict the future, it is useful to first review similar past events to guide us on what we should do next. Although COVID-19 may develop into an unprecedented event, it is far more likely that it will follow patterns matching other large virus outbreaks such as occurred with SARS, H1N1, and MERS, among many others.

A recent report by Marcus and Millichap (see below) that reviewed the impact of past pandemics on real estate investments, noted that while all resulted in short-term market volatility,

“The markets stabilized in the range of three to six months on average. Barring a devolution into a far worse global health emergency—job creation and economic growth will both decelerate but remain positive. This should support real estate fundamentals and lead to a relatively stable outlook for the sector over the remainder of the year.”

The suggestions in this report are consistent with our advice to clients and investors to maintain a long-term outlook and avoid rash short-term decisions.

2. Real estate fundamentals remain sound.

A report published in early March by Avison Young stated that:

“It should be noted that demand for real estate investments remains at a high level, with multiple sources of capital active in the market. Any reduction in interest rates and bond yields will also encourage further flows of capital into the real estate sector.”

In many urban US markets, demand for housing remains high and while many people are temporarily reducing spending on discretionary items such as eating out, taking vacations, going to sporting events, etc., we all continue to find ways to keep a roof over our head – and landlords continue to collect their owed rent.

3. Stay calm and minimize exposure to those who predict doomsday scenarios.

Unless you decide to become a hermit and move to a cabin far away with no access to outside communications, you will not be spared from a flood of headlines about COVID-19 and be witness to hour-by-hour market corrections and adjustments. Rather than listening to prophets of doom and gloom, look to experienced real estate experts for their suggestions and advice. As Marcus and Millichap point out:

“COVID-19 is unlikely to have severe, long-lasting effects on the commercial real estate sector. Falling interest rates will propel refinance and acquisition activity and investors will be able to lock in low interest debt . . . so investment activity should remain stable despite a lack of confidence in the wider economy.”

These perspectives are largely based on how markets responded to past pandemics and the current situation with COVID-19 remains unclear. If matters become much worse than what has been experienced in the past, different outcomes could certainly arise. Due to the success of many of our investors who use the lessons of history to guide their investment strategies, we side with the conclusion of the Marcus & Millichap report which expects reduced but still positive economic growth even in the face of these uncertain times along with continuing underlying demand for solid income real estate growing markets.

Please contact us via email at info@FirstGuardianGroup.com or via phone at 866-398-1031 to learn more about current income producing real estate investment opportunities plus strategies to defer taxes on the sale of real estate assets.

We wish all of you to stay healthy as we get through this challenging period.

References
Coronavirus Outbreak Special Report by Marcus Millichap
COVID-19 Global Real Estate Implications by JLL 
COVID-19 Impacts on Real; Estate by Avison Young

Paul Getty

Paul Getty is a licensed real estate broker in the state of California and Texas and has been directly involved in commercial transactions totaling over $2 billion on assets throughout the United States. His experience spans all major asset classes including retail, office, multifamily, and student and senior housing. Paul Getty’s transaction experience includes buy and sell side representation, sourcing, and structuring of debt and equity, work-outs, and asset and property management. He has worked closely with nationally prominent real estate brokerage and investment organizations including Marcus Millichap, CB Richard Ellis, JP Morgan, and Morgan Stanley among others on the firm’s numerous transactions. Paul Getty also maintains a broad network of active buyers and sellers of commercial real estate including lenders, institutions, family office managers, and high net worth individuals.

Prior to founding First Guardian Group/FGG1031, Paul Getty was a founder and CEO of Venture Navigation, a boutique investment banking firm specializing in structuring equity investments made by institutions and high net worth individuals. He possesses over 25 years of comprehensive worldwide business management experience in environments ranging from early phase start-ups to multi-billion-dollar corporations. His track record includes participation in IPOs and successful M&A activity that has resulted in investor returns of over $700M.

Paul Getty holds an MBA in Finance from the University of Michigan, graduating with honors, and a Bachelor’s Degree in Chemistry from Wayne State University. He is a member of the Institute of Real Estate Management (IREM), a Certified Property Manager Candidate (CPM), and a member of the US Green Building Council. Paul Getty holds Series 22, 62, and 63 securities licenses and is a registered representative with LightPath Capital Inc, member FINRA /SIPC.

Paul Getty is a noted speaker, author, and actively lectures on investments and sales and management related topics. He is the author of The 12 Magic Slides, Regulation A+: How the JOBS Act Creates Opportunities for Entrepreneurs and Investors, and Tax Deferral Strategies Utilizing the Delaware Statutory Trust (DST), available on Amazon and other retail outlets.

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