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Real estate sectors poised for recovery, executives say

By Mike Wheatley | July 14, 2020

Industry experts in the commercial and residential real estate sectors say they believe both markets have already bottomed-out and that they’re now on the mend, and likely to grow over the next few quarters.

That’s according to the latest RCLCO Real Estate Market Index, which is based on a survey of hundreds of real estate executives across the U.S.

Still, the survey found that the commercial real estate sector has been hard hit by the coronavirus pandemic and resulting economic shutdown, and that some businesses will take longer to recover than others.

Brad Hunter, managing director at RCLCO, said the pandemic’s effects are still rippling out across many market segments.

“This isn’t a ‘cycle’ that we’re in—it was a sudden stop,” Hunter said. “Many sectors of real estate leapfrogged entire stages of the normal real estate cycle and went straight to the bottom. The good part about that is, as they say, you can’t fall off the floor. The real estate executives and developers that responded in this survey feel that the worst is behind us, at least for many sectors of real estate.”

Indeed, most survey respondents said they feel that real estate market conditions are likely to improve over the next 12 months. But the degree to which they’ll recover varies a lot. For example, most respondents said the industrial real estate sector performed well during the shutdown due to an increase in e-commerce activity, and will continue to do well. Facilities that provide cold storage and warehousing are in especially high demand. But other sectors, such as secondary regional malls located outside of main cities, have done poorly. Larger malls have also seen a significant decline in business, and even mega malls are expected to face problems soon, the survey found.

As for residential real estate, most real estate executives are optimistic, saying that they’re over the worst of any coronavirus-related downturn and that they’re now seeing stable business conditions. They say that the multifamily rental, active adult and for-sale residential markets have all bottomed out and are now growing again. As such, strong household formation rates are expected to drive demand for new homes in the next 12 months.

However, some executives suggested that the second home, resort and senior housing markets may not have hit the bottom yet. Most respondents said they believe the hospitality sector is approaching the bottom of its market cycle.

“The largest number of respondents believe that recovery will begin within a year in the hotel business,” the survey noted.

The office sector has felt the rumbling effects of Americans who have jumped to remote work and is still facing a decline. The real estate execs surveyed are mixed on this sector's chances of recovery over the next year due to economic uncertainties and continued prevalence of the work-from-home trend.

Mike Wheatley is the senior editor at Realty Biz News. Got a real estate related news article you wish to share, contact Mike at [email protected].
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