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Real Estate Investing Education Center

COVID-19 Pandemic Impact to Real Estate

When the coronavirus started to spread through our country, it brought about immediate and radical changes. Everything shut down, including schools, restaurants, public places, offices and anything and everything that involved a gathering of people. A question the many people are wondering is how this development has had and will have an effect on the real estate market? 

Gatsby Investment has been leading real estate investors to success for years, and one of the many ways in which we’ve accomplished this is by understanding market trends and affectations before they occur and getting ahead of them. The COVID-19 real estate market is clearly one of those trends. Below we’re going to present 10 possible changes that either will continue to unfold or that could develop both during and after COVID-19.

Effect of COVID-19 on real estate illustration


1. Nothing is NOT affected


The COVID-19 real estate market has undergone and will continue to undergo changes because of the pandemic. We’re going to begin with a look at things from a much wider perspective. The bottom line is that the real estate market is changing because literally nothing that we once even dismissively thought was a regular part of life hasn’t changed. Everything from sending our kids to school to grocery shopping to exercising to how we work is radically different than it was even a year ago. That is going to have a profound effect on the real estate market as it has on every other market that exists.

2. Commercial real estate is going to suffer


More than 100,000 restaurants have closed during 2020 in the United States. Tens of thousands of retail outlets have also closed down during the year across the country. Millions of people have lost their jobs and millions more have been working at home for months. Even schools have gone virtual to at least an extent. That’s an enormous amount of people who are no longer using commercial spaces, and that leads to a large number of organizations that are either being forced to or voluntarily realize that they are no longer going to need those spaces for their operations. Given that commercial properties are largely valued based on the revenue they generate, the COVID-19 real estate market in a commercial sense is going to suffer for the time being, and it could be undergoing permanent changes in some respects.

3. Malls may be repurposed


The COVID-19 real estate market is going to inflict harm on commercial investments for the time being, but one thing that’s true about real estate in general is that those who own these properties tend to find ways to try to turn things around. According to CNBC, thousands of retailers have already shut down this year, and that’s leaving several large mall ownership companies vulnerable to serious problems. However, if 150 million square feet of space is suddenly open, it could lead to different ideas for these properties. Repurposing is something we’ve seen even recently with old warehouses being rebuilt into condos and lofts, so something like that could occur with mall spaces going forward. The right idea could revitalize these properties just as it happened with those old industrial neighborhoods.

4. Office spaces could see similar repurposing


According to a report published in Bloomberg, approximately half of the workforce in major American cities continues to work remotely. The numbers and percentages vary from market to market, but overall, more than one-third of all US workers are handling their jobs on a remote basis, and several reports have indicated that a large percentage of these workers will move into either long-term or even permanent remote roles. As is the case with retail spaces, all this newfound availability could lead to new strategies for putting these spaces to use, as once again their value is largely determined by the amount of revenue they generate.

5. Warehousing space could rise in value


Given the retail apocalypse, as it’s been called, that was already starting to take place before the pandemic hit, one area of COVID-19 real estate that could see a boost is warehousing space. That’s because online retail sales are booming, to say the least. According to report on Digital Commerce 360, global digital sales grew by a factor of 45 percent between last year and this year so far, and online sales in the United States alone rose by 36 percent during the same timeframe. That means that billions of dollars in ecommerce sales are being shipped somewhere, and some expect that warehousing space is going to be at an all-time high in terms of demand as these shipments are processed and moved around the country.

6. The population could spread out more evenly


As of now, approximately 80 percent of the American population lives either in or near large urban and metropolitan areas. The reason for this statistical reality is quite clear. Large cities are hubs of business, so people who work need to live near them. Given the numbers with regards to working remotely, it’s possible that people who can now hold their jobs from anywhere could start to move into different areas. According to New Geography, large states with generally high tax rates like California, New York and Illinois among others are seeing their populations drop. Other states with lower tax rates overall such as Texas and Florida are seeing people move there rapidly. That could change the residential real estate market in all these places.

7. Homes will add to their general uses


For generations, residential homes generally held one purpose: to house their residents. Over the past year, homes have become workspaces, schools, workout centers and just about everything else that used to exist in other locations. As that happens, people will likely put more investment into their homes to accommodate for these uses, and that in turn could add to the average value of homes in markets across the United States.

8. The economy will affect home prices 


On the other hand, on a shorter-term basis, the COVID-19 real estate market could also see a bit of a drop based on what could happen with the American economy overall. To date, tens of millions of people have lost their jobs, and it’s possible that this trend could continue. If that’s the case, then the number of buyers in the residential market could drop and perhaps drop significantly for the time being. That would lead to a drop in the average price of homes in some situations, at least until the jobs market turns around or some other forms of relief come to pass.

9. The residential selling process is changing rapidly


The days of scouring the newspaper for homes to look at and then either scheduling a time for a showing or going to open houses are coming to an end in many respects. The COVID-19 real estate market, like everything else, needs to adhere to the new norms of the pandemic, which means that people need to avoid meeting others as much as possible. That has raised the importance of technology in the real estate market to new heights. These days, more and more people are viewing properties virtually with 3-D cameras, drone technology and the like. In addition, even the home purchasing process is moving to more of a digital environment instead of what used to involve sitting down in conference rooms and signing documents in a group.

10. Real estate investment firms are rising in importance


Finally, given all the changes that are occurring at a rapid pace in the COVID-19 real estate market, people may be wondering how they should proceed if they want to invest. Unless you’re spending all your time living and working in the real estate world, it can be especially difficult to have a deep understanding of where to look for properties, what to offer on properties and how to handle the processes that are in place.

Therefore, it can feel safer to turn to an investment firm that is specialized in these areas and stay up to date with the market trends. Gatsby Investment is a market leader that has earned top returns for years running. By following the trends and demand closely, we feel confident that we will continue to lead our investors to success, even given the current circumstances. If you’d like to learn more about how we can work with you, feel free to contact us at any time.