It goes without saying that 2020 did not go as any of us thought it might when we prepared to turn over the calendar a year ago. This year has certainly been filled with challenges as we navigate the COVID-19 pandemic. But with challenges often come opportunity. On a regional, national, and international level we have shown great resiliency – turning kitchen tables into offices and school desks and turning Zoom meetings into board rooms.
Turning to real estate, COVID has impacted the residential and commercial sectors in very different manners. Limited inventory and increased demand have pushed residential real estate prices to all-time highs, especially in “COVID Communities” such as Suncadia and Chelan as buyers have sought more space in less populated areas as they take advantage of working from anywhere.
On the flip side, commercial real estate, especially the retail and office segments, has had, unsurprisingly, a very challenging year, marked by historically low transaction volume. As businesses continue to downsize office space and restaurants and small retail businesses struggle to stay afloat amid renewed lockdowns, commercial real estate will continue to struggle through at least the first half of 2021.
A light has emerged at the end of the tunnel as vaccine distribution began in earnest this month – reason for hope as we enter the new year. However, there is still have a long road to recovery as we continue to struggle to get aid to small businesses and unemployment remains elevated.
So, where does this leave us as we had into the new year?
- Transaction volume, especially in the commercial sectors will remain low through the first two quarters of 2021 as owners refuse to sell at depressed prices.
- However, an uptick in destressed sales in likely as some property owners cannot hold on any longer without meaningful stimulus or an accelerated return to normalcy.
- A correction in residential real estate prices is not out of the question if supply can close the gap on demand.
- A potential bubble is developing in COVID Communities, especially if employers call employees back into the office as the vaccine becomes more widely distributed.
- Finally, if 2020 has taught us anything, it is that attempting to predict the future is often futile, but resiliency, flexibility, and creativity are traits that will continue to benefit real estate investors, developers, and lenders in the coming year.
At Juniper Capital we will be here for your real estate financing needs regardless of what the new year may bring. Leverage Juniper’s experience and expertise in the year to come – give us a call to start the conversation today.