Particularly worrisome in the real estate legal world during this second wave of the COVID-19 pandemic is the $2 Trillion dollars in commercial real estate loans at risk. Small and medium-sized local and regional banks may not have enough set aside in allowance for loan and lease losses, especially now that hotels, restaurants, stores, and other retailers are filing for bankruptcy and not able to pay rent. Some small and medium-sized banks have too large of a percentage tied up in commercial real estate and are writing off bad loans that were previously unimaginable for default. While interest rates are low, the flip side is that commercial real estate legal issues loom large right now. Landlords and tenants are unable to pay; COVID-19 cases are growing; the economy may dip soon yet again; and law firms will be busy.
For these reasons – and for the reason that the economy and COVID-19 are fluctuating wildly – valuations are difficult to pinpoint. Credit is tighter due to these unforeseen circumstances, and businesses are unable to hire or to expand. With remote work and workers not working in city centers, commercial real estate’s value has plummeted.
For law firms such as ours, keeping an eye on such fiscal strains is important for our commercial real estate clients. Commercial real estate is straining the entire financial system and the overall economy. We at Goosmann Law keep close track of new CDC guidelines for evictions for landlords and tenants in commercial real estate, and we are always ready to address restructuring, new leases, or investment opportunities.
Society is changing, a vaccine is not yet available and may not be widely available for some time, and people and companies are uncertain of their financial future. Goosmann Law is here to provide steady advice during a complicated time. We look forward to helping clients, large and small, local and national, navigate these unchartered commercial real estate waters. The next year will surely produce upheaval, but it is also an opportunity for significant innovation. Our transactions and real estate teams are also ready to assist with new deal opportunities due to this economic uncertainty in the commercial real estate market. We foresee an uptick in M&A activity in the last quarter of this year and early 2021.
Innovators in the commercial real estate scene such as tech start-up Cadre allow new investors to enter this shaky but potential-filled market. We will keep an eye on such start-ups as well.
Downtowns may be quiet now, but commercial real estate will pick back up. The small and medium-sized players that can withstand the current shock waves will be the ones best positioned to take advantage of the next wave of innovation.