Mid-Year Observations for the Regional Real Estate Investor

Despite the current COVID-19 environment, you will find that certain commercial real estate asset classes remain healthier than expected, with performance and return profiles often very industry-specific and related to the asset’s location. Healthcare-related properties continue to outperform their peers as they display stability; small bay industrial buildings within infill locations offer stable homes for businesses; warehouse assets are facilitating e-commerce and the increasingly common last-mile delivery process; and, suburban assets are outpacing their urban counterparts. MacKenzie’s Owen Rouse, Vice President of Investment Sales, provides the following mid-year observations for the regional real estate investor.

What Should Real Estate Investors Care About These Days?

• Financing terms are as borrower-favorable as they have been in three years and prudent borrowers are taking advantage as community banks try to grab market share from their larger brethren. Smart borrowing has a role to play.
• Formerly ignored, robust accounting and reporting systems inside management companies simplify partnership tax preparation while strong reporting makes for a reliable paper trail facilitating a cleaner exit from the asset in the future.
• Identifying rent roll risks: assessing renewal probability, tenant financial stability and the replacement tenant universe.

Who is Selling Real Estate?

• Owners are “pruning” their portfolios to increase stability by culling out underperforming properties which would benefit from more active and strategic management. Additionally, generational wealth management is underway as children may not wish to follow in their parents’ investment footsteps or be saddled with “needy” real estate.
• Owner-occupied real estate that can be thoughtfully repurposed will be sold at good terms.
• While certain buyers have looked to specific asset classes to exact a discount from sellers, post-COVID discounting is being successfully rejected by sellers.

What is on the Horizon?

By the fourth quarter of 2020, any “false bottoms” felt in the summer and fall will be revealed. As the government curtails support mechanisms, loan forbearance ends, and we learn what “back to work’ really means, look for significant changes in the market. The shocks to the system will produce opportunities just as prior shocks have. Investors that get and stay plugged into the real estate landscape of leasing, management trends, and understanding where the market is made, will benefit. Strategies and alternatives are formulated now for deployment later.

As COVID-19 remains present and growing globally, actions to curtail the virus will continue to have an unprecedented impact on the way we live and conduct business. Having the insight of an experienced real estate investment broker can ease the navigation of these uncertain times and more strategically align your business objectives. To speak to one of our team members, contact us today. To learn more about MacKenzie’s brokerage division, click here. We are proud to serve the Mid-Atlantic region with offices in Baltimore City, Baltimore County, Harford County, Howard County, and Annapolis.