COVID-19’s Impact on Commercial Real Estate

By: Jack Knatch

As the nation prepares to exit the pandemic and get back to business as usual, commercial property owners face a slow, delayed recovery. Only 25% of the PPP loan amounts could be spent on commercial rent, so many landlords were forced to take losses, even with government-backed stimulus. According to Trepp analytics in Bloomberg, delinquency rates soared to 50% across the commercial real estate market in June 2020.

The process of financial restructuring is already taking place across the private real estate spectrum. Let’s break down the effects of Covid-19 into three CRE response categories:

Buying: Aggressive, Yet Optimistic

Even faced with the looming threat of vacancies and downward pressure on rent prices, some investors seek to capitalize on forced sales. The value of retail, hotel, and office prices declined between 5% and 10% in 2020, as reported by Forbes. This shift has attracted the attention of competitive buyers who anticipate a speedy (and notably optimistic) recovery on devalued properties.

SBA business loans, including SBA 504 loans, are good options for businesses that want to stop renting and take advantage of low property values.

Selling: Decreased Property Values

Covid-19 has switched the power dynamic and created a renter’s market. Last year, many landlords chose to renegotiate contracts and offer lower rent in exchange for longer lease commitments, but that has also lowered property values and affected cash flow.

If owners cannot refinance and are forced to sell, the list price will be deeply impacted by recent vacancies and revenue loss. SBA loans can’t be used for investment properties, but there are other options for commercial real estate loans and short-term cash flow funding.

Refinancing: Time is of the Essence

Commercial borrowers have access to low short-term interest rates, which can unlock favorable options for refinancing, but applications are competitive. Luckily, Helpwithmyloan has a 95% funding rate and automated underwriting with access to more than 300 lenders. We have successfully funded over $100M for our customers and can help you get matched for commercial loans in as little as 24 hours.

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