By: Felipe Rivas
2 min read June 2020 — Although the COVID-19 pandemic has the curtailed demand for commercial real estate, it has also accelerated the transition from on-site to online shopping, Colliers International Atlanta CEO Bob Mathews told Focus: Atlanta. Though it is hard to predict the lasting impact of the virus on the marketplace, industrial usage will likely fare better because of the general demand from e-commerce, last-mile delivery and everything associated with the change from the on-premise to the online consumer economy, Mathews said.
What was the start of 2020 like for the Atlanta operations?
We had a strong first quarter, matching our 2019 performance from the same period. At present, it is difficult to gauge the long-term impact of COVID-19. The indications point to a reasonably significant dip in overall transaction activity, which will impact revenues. The answer lies in the time it takes for the U.S. economy, and in particular the corporate sector, to rebound. That will have a direct impact on our deal flow. We have already had a number of deals scrapped or put on hold as a result of the crisis, but the true net impact on our revenues will become clear further down the road. Demand has not completely disappeared, but it has been severely altered.
How are landlords and tenants navigating the challenges brought on by COVID-19?
We have found that landlords in the industrial and office sectors have been willing to help some tenants with their leases and rent payments. If the tenants have a strong payment history, landlords can often defer rent if necessary, particularly in the case of small and medium-sized businesses that are under significant stress in the current environment. Available solutions include deferrals and temporary concessions in exchange for extended rental terms.
Landlords in the retail space have also proven to be willing to negotiate with tenants suffering from this COVID-19 interruption; however, they have to see a long-term business plan and a path back to sustainability. Restaurants have suffered the most of all retail tenants. It will be a long way back to business for many of the smaller, less-capitalized operators.
Which sectors are performing well during the current economic cycle?
It is no secret that Amazon has been profiting from this situation and the company has been considering expanding its operations. So some of the larger corporates are driving demand. We anticipate that most industrial usage will fare better, because of the general demand from e-commerce, last-mile delivery and everything associated with the change from the on-premise to the online consumer economy. This change has been happening for the past 15 years but with COVID-19, it has accelerated as consumers of all ages have become used to online spending. Small and medium-sized businesses will have to adapt and figure out their role in this new marketplace.
What is your outlook for the real estate market in the next 12-18 months?
Growth cycles in the real estate sector tend to last for about 10 years. Going into 2020, we have had about 10 years of strong growth, following the 2008 financial crash and its aftermath. So we were expecting a slowdown. COVID-19, however, is a black swan event that has caused a nosedive far sharper than we had foreseen. It’s an extremely deep hole and it will take time to climb our way out. Aviation, tourism and hospitality are all huge contributors to the economy, and until they recover, the economy will continue to suffer. I think it will take a long time.
We have had to reconsider our strategic goals. Instead of our usual three- to four-year plan, we are starting on a short-term one-year plan to take us through to June 2021, because it is so hard to know what is around the corner. Fortunately, the banks have strengthened significantly since 2008, and the government also has capital available to ease the impact of this crisis. For investments, there remains strong sources of U.S. and overseas capital for CRE, so that gives me hope that we may recover faster than expected. Our past shows that the United States always finds opportunity and that will open the door for more innovation. As a firm, we have to ensure that we are well-positioned to grasp those opportunities.
To learn more about our interviewee, visit: https://www2.colliers.com/en/experts/bob-mathews