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COVID-19’s Impact on Property Sales Will Show Up Next Quarter

National  + Weekender  | 

Some acquisitions and dispositions of considerable size have been reported in Connect Media’s daily news since the spread of the coronavirus across the U.S. began increasing momentum earlier this month. Those deals had been in the works for some time, and their inclusion in first-quarter tallies will likely make Q1 appear stronger overall than more recent deal velocity might suggest.

With this in mind, a new NKF report broadly surveying the impact of COVID-19 on commercial property sectors hopes to draw lessons from the pace of transactions in other parts of the world, as the virus began spreading in those regions.

“Commercial real estate sales activity across all property types declined 50% in the Asia Pacific region during the first eight weeks of 2020—as the virus was spreading rapidly—compared with the same period in 2019,” NKF says in the report prepared by Alexander Paul and Jonathan Mazur, citing data from Real Capital Analytics. The decline in Europe for the comparable period was 18%.

“In the Americas—where the coronavirus was not fully recognized as a major threat until late February—transaction volume was up 10% during the first eight weeks of 2020,” the report states. “This suggests that a decline in U.S. volume will be recognized in second-quarter data.”

In the meantime, NKF reports that the debt market’s low yields still represent an opportunity for investors, even as some lenders have begun pulling back. “Well-capitalized investors are in a strong position to buy,” the report states.

For now, NKF says, sales transactions that were near closing continue to move forward, “but deals in the early stages are on pause. Existing stabilized properties with good tenancy likely will be less impacted than properties with significant vacancy. There will be imbedded added risk in the discount rate and underwriting projections in the near term.”

Longer term, NKF suggests that the financial implications of the COVID-19 crisis “could more closely resemble those from other non-financial disruptions, such as the terrorist attacks of 9/11 or weather-related events such as Superstorm Sandy in the New York area, than they do the financial crisis of 2008. However, this is still a fluid situation.”

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About Paul Bubny

Paul Bubny serves as Senior Content Director for Connect Commercial Real Estate, a role to which he brings 13-plus years’ experience covering the commercial real estate industry and 30-plus years in business-to-business journalism. In this capacity, he oversees daily operations while also reporting on both local/regional markets and national trends, covering individual transactions across all property types, as well as delving into broader subject matter. He produces 15-20 daily news stories per day and works with the Connect team and clients to develop longer-form content, ranging from Q&As to thought-leadership pieces. Prior to joining Connect, Paul was Managing Editor for both Real Estate Forum and at American Lawyer Media, where he oversaw operations at both publications while also producing daily news and feature-length articles. His tenure in B2B publishing stretches back into the print era, and he has served as Editor in Chief on four national trade publications. Since 1999, Paul has volunteered as the newsletter editor of passenger rail advocacy groups (one national, one local).

  • ◦Financing
  • ◦Sale/Acquisition
  • ◦Sale/Acquisition