As many people may be aware, the full weight and economic impact of the global coronavirus pandemic has yet to be felt, particularly since many countries are only just now starting to see an outbreak. There are many markets and economies that will be hard hit by this global pandemic, but real estate may end up taking one of the hardest hits. Here are three ways Covid-19 is having a significant impact on real estate.
- Massive surplus of commercial property expected
In order to stop the spread of the virus, many cities have canceled large events, closed or restricted restaurants and even encouraged retail establishments to significantly curtail their store hours. With travel also being restricted, hotels and even travel sites like AirBnB are taking a major hit. Many smaller businesses can’t survive, which eventually creates a massive surplus of retail space. With the global economy in freefall, there just isn’t enough capital to encourage stimulus plans to refill those spaces.
- Travel restrictions also reduce movement in general
The real estate industry is dependent on turnover. New builds require new owners to buy and move into them and new owners for the homes they vacate. Those new builds also require a robust workforce to build them, however. Fear causes people to shelter in place and a global pandemic even more so but a global pandemic also creates a decreased workforce with which to try and keep up with demand. With Covid-19 taking several months to sweep across one population before moving to another, it could take months for housing markets to pick up steam again.
- Stagnant housing markets create stagnant economies
When people move, they have a tendency to buy new things. This creates an economic stimulus for businesses as far-reaching as retailers of cleaning supplies to the providers of moving trucks to furniture manufacturers. A stagnant real estate market has far-reaching consequences that extend far beyond the real estate market itself. In addition, with China being the first and hardest hit from Covid-19, we have yet to see the types of shortages this will create the world over.