“After an unprecedented year addressing the impacts of COVID on the industry, a contentious election, as well as enormous societal unrest, we are all focused on what the future holds,” stated Lisa Pendergast, CREFC executive director. “As an organization dedicated to maintaining liquidity in the commercial real estate space, a vital component of the U.S. economy, CREFC is proud to offer our conference attendees thought-provoking, valuable content that shines a light on how all of these factors impact commercial real estate and the economy writ large. To the good, we are entering a new year in which science prevails and vaccines are available — hopefully in plentiful quantities as we progress through 2021.”
“Notwithstanding a great sense of hopefulness,” continued Pendergast, “2020 was incredibly difficult for a number of commercial and multifamily property owners, our borrowers, particularly in the hotel and retail sectors. With them in mind, we will continue to advocate for appropriate borrower relief, as well as tenant rental assistance via direct government support that goes beyond the limited scope provided by the Paycheck Protection Program. Direct relief to tenants not only provides them with the ability to continue to operate their businesses, but also alleviates the challenges eviction moratoriums impose on property owners and their ability to hold on to their properties.”
Industry Sentiment: What’s to Come...
Industry Sentiment: What’s to Come...
The introduction of a COVID vaccine has bolstered this view. Panelists often cited the healthy state of the commercial real estate industry, banks and our financial markets when the pandemic struck.
The property sectors that suffered the most are retail and hospitality, yet loan servicers acted judiciously with property owners to provide relief to avoid foreclosures with far less of this activity than many expected given the dire circumstances that COVID presented. Indeed, in-foreclosure and REO assets remained low at 1.2% and 1.0%, respectively, across conduit and SASB markets as of December 2020. In the office sector, many anticipate a return to the office in some form beginning later this year, and cited factors such as the critical importance of ‘getting back in person’ for the sake of younger team members, as mentorship and fostering a healthy and collaborative corporate culture are foundational for advancing one’s career path. Some panelists noted they are safely back in the office already while others are looking for assurances of widespread vaccination to begin reentry.
The retail sector was in distress prior to COVID and continued to suffer as brick and mortar retail has been all but made obsolete due to the increase in e-commerce. The rise of e-commerce has created an incomparable demand in industrial space, now the darling of commercial real estate investment.
Hospitality has also suffered greatly, but the leisure sector has started to regain its strength though the groups, conferences and meetings sector still lagging behind as business travel continues to be on hold.
The office market remains strong for now as long-term leases in place have steadied that sector. However, it is expected that many companies will go through a ‘right-sizing’ exercise ensuring their space holistically meets the needs of a post-pandemic workforce, many of which may now choose to work from home. There is a sense that considerable stress may be looming in the office sector, but time will tell.
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The CRE Finance Council (CREFC) is the collective voice of the $4.8 trillion commercial and multifamily real estate finance markets. For more information visit crefc.org.
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