The impact of COVID-19 on the global economy is colossal and wide-felt. With China, the second-largest economy in the world, recording the largest outbreak of the virus and suffered the greatest. The COVID-19 pandemic has disrupted the manufacturing processes and led to significant breakdowns in the supply chain, which has resulted in economic volatility. Taking a cue from how the virus outbreak has affected the Chinese economy, the American real estate market should brace up for the impact.
Revenue and growth in commercial real estate will slow
Roey Hayon says, “The US commercial real estate (CRE) would experience the hardest hit if there is a full-blown outbreak of coronavirus in the US. Production and other economic activities will ultimately reduce because workers and employees would rather stay indoors to maintain their safety. The outbreak will also considerably reduce the spending rate of consumers and increase the default rates in commercial real estate loans.”
Companies and CRE investors are planning on how to help mitigate the spread of the virus, most notably in properties where multiple people reside or work. An enhanced cleaning and disinfecting process are safe and healthy to reduce the potential spread of COVID-19. However, all investors are expected to have other back-up plans; perhaps the virus isn’t effectively contained as projected.
“The global market has witnessed a lot of impacts since the coronavirus outbreak. For instance, in the past four weeks, the three major US stock market indexes lost over 25% of their value, the Fed dropped interest rates down to 0.25%, and the bond also declined drastically to a rate that has never been witnessed before. We also saw the Senate approved $1 Trillion emergency package for COVID-19.” Says Roey Hayon.
These indicators show that the impact of the coronavirus outbreak is hardly impacting the global market.
How bad would the impact of coronavirus in American real estate
Roey Hayon says, “The depth of the impact of COVID-19 depends on how widespread the virus gets. While the number of reported cases of coronavirus in the US is still relatively low compared to the US population of 327 million people, the virus is spreading quickly. And only time will tell how volatile the market will be. However, investors can take advantage of the lowered interest rates to invest in real estate as we brace up for the impact.”
Though the US real estate markets have mostly recovered from the 2008 recession, the coronavirus outbreak could usher in another full-blown recession in 2020 and beyond if the spread continues.