Real Estate After COVID19
By Rusty Tweed | President
I am about to go out on a limb here and speculate what affects SARS CoV-2 (the technical name for COVID-19) will have on the economy. This virus is something new and we have yet to experience anything like this in our lifetimes. It’s a wonder that at the time of this writing (April 13th) we’ve watched one of the most prosperous economies that many of us have seen come to a grinding halt causing a huge increase in unemployment in just a matter of weeks. The effects of this virus are not just limited to the shores of America. When one turns on the evening news, they are reminded that rich or poor, this is a virus that no nation is safe from. In such dark times like these, it is hard to be sure of what the outcome of all this will be.
California is currently under lockdown and when this all first began; we were told that that the lockdown would be in place until mid-April. It has now been extended to May 15th. This will mean that most businesses will have to go for two months without any form of revenue leading to disastrous results. Story after story, I am hearing of people who have had to lay off huge chunks of their workforce or worse yet, have to permanently close the doors to their businesses altogether.
My family and I love to travel, in fact, right before all of this, my family and I had planned a trip to Tuscany! But of course, it was canceled. As a business owner myself when I step away for even a week, it can adversely affect my income. With many businesses being forced to close for two months it’s hard to imagine that when these businesses reopen that they won’t be facing a financial disaster! In addition to that when things do re-open, what will be normal? I’m sure my wife will think twice before jumping on an 18-hour trip to Europe! After the devastation experienced in Italy, it is one of the last places we want to visit. What about public gatherings? How will the Greek Theatre look post-COVID-19? Will people really want to be pressed up shoulder to shoulder sitting inches from the next person when flu season rolls around? The effects of COVID-19 will be felt for months and maybe even years to come.
Some people predict a “V” shaped recovery but with everything that is transpiring and considering the economic onslaught, I don’t see that being very likely. There was just too much lost during this recession to jump back to “normal” that quickly. With that, what will normal even look like after this? Another variable to consider is how long we will remain in lockdown. The longer our markets remain sedentary the longer it will take to bounce back. The more probable scenario, as opposed to a “V” shaped, will be a slower recovery more along the lines of many months or even several years.
This shining light at the end of the tunnel in all this is that there are not just losers in this environment but winners as well. In the entrepreneurial spirit that defines America, some businesses have been able to think on their feet and keep producing. Many of us, including myself, have quickly adopted alternative ways of conducting business and adapted to an at-home working environment. An example of this would be our daily GoToMeeting Calls where we coordinate our plans and communicate on how we will continue to execute our mission despite our physical distance.
Around the world, businesses are being forced to become nimble and reactive. For example, car company Ford was recently able to source the raw materials for face masks from a different distributor and as a result, was able to produce 2.4 million face masks in just 2 ½ weeks! Another company, Eclipse International, shifted its manufacturing process from making bedsheets to facemasks. Or take Pittsburgh’s own Thar Process INC. which extracts carbon dioxide and is a purification company. A chemist on their staff practically whipped up a new hand sanitizer overnight to deal with the lack of supply! These are all examples that the American ingenuity is still alive and well and entrepreneurial spirit, STRONG!
In light of the present circumstances, TFS Properties has been quick on its feet. We are tailoring our investment focus on behalf of our clients towards resilient real estate. Away from investments that are (or will likely be) affected by the present pandemic. Broadly, our strategies include thoughtful consideration of geographic areas within the country as well as investment types. Hotels and retail properties (e.g., most shopping centers) are not high on the list. Residential properties (particularly the homes and apartments that people must maintain for shelter) can provide excellent investment opportunities. Also, net-leased real estate (when the real estate is quality and well-located) with also both the credit and return being superior, can make excellent investments, particularly during markets like the present. TFS Properties has for years specialized in finding quality investments across the USA that meet these criteria. With our years of experience, we will be able to assist you with your pandemic-mitigating investment needs.
There is a silver lining in this disaster and it’s that Americans are innovative, and we will use our creativity and hard work ethic to adapt to this new environment. American optimism knows no bounds… Surprisingly the cruise ship industry just reported that they are expecting a 40% increase in bookings from 2019-2021 which is great! I do not expect everything to go back to the way it was once these restrictions are lifted but I do not see a crippling crash either. It won’t be easy but once a majority of Americans are back at work, our natural energy will make recovery impossible to avoid and things will, hopefully, return to normal within a year or two.
Good Luck and Stay Healthy!