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The number of people that filed for unemployment soared to tens of millions in the past few months, and the coronavirus pandemic is still gripping the nation at large. While investors might think this is not a propitious time to get aggressive, experts suggest that there are opportunities for those that are willing to look. A lot of these opportunities will be in distressed or value-add properties. However, most investors are taking a break, trying to grasp the constantly shifting landscape.
The volume of investment sales in April reduced to 70% in comparison with last year, and is expected to reduce even lower in May. Experts say that there are many great deals out there, but there will be challenges to overcome in completing proper due diligence.
Since the pandemic is still shaping the environment, investors need to stay disciplined without becoming overeager, and most importantly, they need to be patient. However, investors must also be prepared to ‘play offense.’ Many lenders, large banks in particular, are out of the market, on the sidelines, but the opportunities in both debt and equity are starting to become more appealing.
Experts say that the switch to technology which enabled people to work from home could also aid the investors when they decide to continue building long-term value. Most companies have now come to the realization that people can be very productive, even while not necessarily being together physically.
In April, Nationwide Insurance announced a far-reaching change, shutting down most of its offices to switch to a work-from-home model. Even though most other companies will not be making changes as drastic as this, the urban markets will definitely take a hit. More people will move to lower-cost areas in the coming months, and the internet will give them access to many benefits which the big city provides.
Large urban areas are weighed down with the costs from the virus. It remains to be seen if institutional investors will change their views on both the appeal, as well as the risks, of urban centers. This coronavirus could reinforce trends that were already underway. Wall Street capital has avoided the danger of going into markets and buying at high cap rates where the fundamentals of tenant demands are shallow, and liquidity is low. However, experts agree that there will now be more concern from investors about higher-cost urban centers like Chicago, and funds may focus more on high-growth, low cost markets.