Commercial Real Estate Feeling Effects of COVID-19

The coronavirus has become a worldwide pandemic, affecting the economy and lives of people across the entire world. This virus has affected businesses as well, forcing many to close down or revise their operations in order to make money. Commercial real estate has really been feeling the pain, since tenants have not been able to afford their lease payments.

In normal times, the landlord would usually still get paid, regardless of whether or not the tenant’s business was making money. That hasn’t been the case in 2020. Businesses are seeing huge profit losses as residents are forced to quarantine during the pandemic. Non-essential businesses have been forced to shut down. Many retailers have filed for bankruptcy.

As a result, commercial properties have seen vacancies. There is a significant decrease in the need for office space as businesses offer telecommuting and remote work arrangements to employees. Since March, the commercial real estate industry has been hit hard. Landlords have had to deal with rent deferrals and even tenant bankruptcies since many businesses have seen their income essentially dry up overnight. Some have temporarily closed, while others have become creative and find other ways to make money. Still, in most cases, they will not be making the same income they did pre-COVID.

Most of these frontline businesses have seen their income dry up overnight. Some have temporarily closed, others are finding creative ways to make some money in online retail or takeaway services, for example, but most will replace only a fraction of their pre-crisis income.

Rent is the biggest expense a business faces every month. Location is a huge factor, but a business can expect to pay $20-$70 per square foot per month for rental space. Therefore, it is not uncommon for a company to pay $5,000-$10,000 a month or even more for larger spaces such as restaurants and gyms. Because wages can be suspended during a shutdown, many companies turn to layoffs to stay afloat.

The good news is that some subsectors are doing well. This includes warehousing and retail space related to e-commerce, self-storage, grocery stores and pharmacies. Data centers have also not been affected by the pandemic.

While times may be tough now, it is expected that things will turn around soon. When the pandemic is under control — which likely won’t happen until there is a vaccine — a rebound is possible. Soon, many people will be tired of being housebound and they’ll be looking for things to do.

Learn More About Commercial Real Estate Transactions

Commercial real estate may not be a good investment right now, but the economy can quickly change. If you do have a commercial property, the right legal team can poise you for success.

Get help from Orlando commercial real estate transaction lawyer B.F. Godfrey from Godfrey Legal. We can resolve any issues and ensure that the process goes smoothly. Schedule a consultation with our office by calling (407) 890-0023 or filling out the online form.

Resources:

investopedia.com/commercial-real-estate-s-coronavirus-reckoning-5087824

womply.com/blog/how-much-does-it-cost-to-rent-space-for-a-small-business/