Coronavirus continues its impact on the commercial real estate market. 

COVID-19 has hit the commercial real estate market in North America particularly hard.  Growth for this sector has stalled in the first half of 2020.  According to a Preqin report, real estate funding for private equity is past its peak, which was $83 billion in 2019.  Only $23 billion has been raised as of June 2020.  In terms of deals made, 3,639 were made in 2019 and only 968 have been made so far in 2020.  

Commercial real estate is not alone, as many aspects of the real estate sector are falling short of their goals.  The retail and hospitality sectors have been hit the hardest and face a dismal outlook.  According to Christopher Beales at Preqin, “As consumers and businesses adapt to enforced distancing and lockdown measures, the way in which Americans use commercial property has abruptly changed.”  Private equity real estate deals saw $3.4 billion in the first half of 2020 and $6 billion in hospitality.  This is a massive drop off from $90 billion in 2019.

The Coronavirus pandemic has dramatically exacerbated these effects, and the rise of e-commerce is making traditional office spaces and shops seem unnecessary.  On the other hand, states like California, Massachusetts, and Texas are thriving in this market.  These states have proved to be resilient and prolific in making deals despite market conditions.  

Ultimately, the market is highly volatile, and business can be quick to adapt.  According to Beales, “However, the commercial real estate market in North America is still growing, and fund managers have a lot of dry powder to spend. As new ways of life arise, new opportunities will come to the market. The challenge for managers will be to gauge what the next 10 years of working, shopping and holidaying will look like.”   Dry powder in the U.S. commercial real estate market is prolific.  It currently stands at a record of $147 billion as of December 2019.  Private equity firms are ready to invest and adapt to get businesses back on their feet.