The COVID-19 Coronavirus has had a massive impact on nearly every sector of the U.S. economy, and commercial real estate is no exception. According to a report by Green Street Advisors, which analyzed the performance of a variety of U.S. REITs (real estate investment trusts), commercial real estate values have dropped an average of 24% across the U.S., with senior housing prices dropping around 49%, hotel prices dropping 36%, and student housing prices dropping 30%.

At the same time, the Fed cut its benchmark interest rate to nearly 0%, while in many cases CRE debt is priced at even less than it was just a few weeks ago.

However, purchasing and financing any asset isn’t without risk, particularly at such a volatile point in the market. Depending on how the market plays out, commercial real estate values may fall even more in the coming weeks. Additionally, a certain number of tenants are likely to fall behind on their rent during this period, making it difficult for borrowers to pay their monthly mortgage payments. This is particularly a concern for retail borrowers, as restaurants, stores and businesses in many major cities have been required to close. This is an even greater concern for asset classes that have already been struggling in recent years, such as B and C-class malls, many of which already face occupancy issues. In addition, with corporate work-from-home measures becoming more commonplace every day, both borrowers and lenders may be concerned about both the short and long-term viability of office properties.

Commercial real estate owners and investors can prepare for the potential impacts of the coronavirus by managing their expenses carefully, taking a close look at their operating expenses and seeing if there are any areas where they can cut back without compromising their business. This will help ensure that their business is better positioned to weather any economic storms that may come their way. Additionally, they should consider taking advantage of the current low interest rates and the drop in commercial real estate values to purchase commercial real estate. According to a report by Green Street Advisors, which analyzed the performance of a variety of U.S. REITs (real estate investment trusts), commercial real estate values have dropped an average of 24% across the U.S., with senior housing prices dropping around 49%, hotel prices dropping 36%, and student housing prices dropping 30%. The Fed has also cut its benchmark interest rate to nearly 0%, while in many cases CRE debt is priced at even less than it was just a few weeks ago.

However, it is important to note that purchasing and financing any asset isn’t without risk, particularly at such a volatile point in the market. Depending on how the market plays out, commercial real estate values may fall even more in the coming weeks. Additionally, a certain number of tenants are likely to fall behind on their rent during this period, making it difficult for borrowers to pay their monthly mortgage payments. This is particularly a concern for retail borrowers, as restaurants, stores and businesses in many major cities have been required to close.

The best strategies for mitigating the risks associated with the coronavirus for commercial real estate include diversifying property types, considering alternative investments, reviewing debt structure, and increasing cash reserves.

Diversifying property types can help spread out risk and reduce the impact of any downturn in one particular sector. For example, if you have investments in both retail and office properties, you may be able to weather a downturn in one sector better than if you had all of your investments in one sector.

Alternative investments, such as private equity, can also help spread out risk and provide a more stable return. Additionally, reviewing your debt structure can help you identify any potential risks and make sure you are in a good position to weather any downturns. Finally, increasing your cash reserves can help you stay afloat during any downturns and provide you with the flexibility to take advantage of any opportunities that may arise.

For more information, please see the following sources:

• Green Street Advisors
• Fed Rate Drops to Near Zero
• 6 Ways CRE Investors Can Prepare for a Recession

The most important considerations for commercial real estate owners and investors during the coronavirus pandemic are to focus on key fundamentals, such as location, size, and tenant mix, and to take a long-term view of investments. It is important to not sacrifice long-term stability for short-term gains, and to structure deals in a way that makes sense from a risk/reward standpoint. Additionally, it is important to be aware of the drop in commercial real estate values, as well as the substantial drop in interest rates. According to a report by Green Street Advisors, which analyzed the performance of a variety of U.S. REITs (real estate investment trusts), commercial real estate values have dropped an average of 24% across the U.S., with senior housing prices dropping around 49%, hotel prices dropping 36%, and student housing prices dropping 30%. The Fed has also cut its benchmark interest rate to nearly 0%, while in many cases CRE debt is priced at even less than it was just a few weeks ago. Finally, it is important to be aware of the potential for tenants to fall behind on their rent, and the potential for office properties to become less viable due to corporate work-from-home measures.

The COVID-19 Coronavirus has had a massive impact on nearly every sector of the U.S. economy, and commercial real estate is no exception. According to a report by Green Street Advisors, which analyzed the performance of a variety of U.S. REITs (real estate investment trusts), commercial real estate values have dropped an average of 24% across the U.S., with senior housing prices dropping around 49%, hotel prices dropping 36%, and student housing prices dropping 30%.

The long-term effects of the coronavirus on the commercial real estate industry are still uncertain. Depending on how the market plays out, commercial real estate values may fall even more in the coming weeks. However, lenders (which are still actively doing business at the moment) may be spooked if values fall much further. For all types of commercial properties, a certain number of tenants are likely to fall behind on their rent during this period, making it difficult for borrowers to pay their monthly mortgage payments. This is particularly a concern for retail borrowers, as restaurants, stores and businesses in many major cities have been required to close. This is an even greater concern for asset classes that have already been struggling in recent years, such as B and C-class malls, many of which already face occupancy issues. In addition, with corporate work-from-home measures becoming more commonplace every day, both borrowers and lenders may be concerned about both the short and long-term viability of office properties.