Coronavirus effect on real estate market and its implications

How will the coronavirus effect the real estate market? the world grapples with the virus and its effects on people, events, travel, stock markets, entertainment, conferences, politics, and investments, there are far-reaching consequences of the coronavirus and its effect on commercial real estate and residential properties.

As fewer people travel, eat out at restaurants, attend concerts, and shop at brick and mortar stores, we may see an increased tendency for people to use delivery services, and stay at home to enjoy themselves on the weekend. For hotels, this means fewer occupancy rates resulting in a drop in revenue due to fewer nights booked and fewer tables busy at the anchor restaurants, or restaurants close to their proximity.

How will coronavirus effect commercial real estate?

As fewer people go to brick-and-mortar stores, the compulsion and urge to shop online increases, and companies like Shopify and Squarespace benefit from new clients. This trend may spell out bad news for malls and great news for those who exclusively rely on their online sales. Could this lead to a new behavior where it becomes uncommon for people to attend large group gatherings and opt for small intimate gatherings and experiences? For example, friends and family may choose to organize dinners at home, or promoters of events may find a niche where pop-up stores become the new norm for appointment only smaller crowds. 

The compression of sales at retail stores has a direct effect on the tenant’s ability to maintain rent and keep the lights on. Landlords end up negotiating decreases in rent payments, so tenants stay and honor their leases. However, lesser rents mean lower cap rates, and lower cap rates result in a lower valuation of properties, resulting in a buyer’s market. 

How will coronavirus effect residential real estate?

Fear is a great motivator for good and for bad. For real estate agents, the coronavirus could lead to bad results as home sellers may opt to avoid using real estate agents, as a result of sales declining. Consider that home buying may decrease during a period of heightened anxiety. In a downward market and where people are less likely to want to meet new people, home sellers always look for an alternative means to sell or buy without a real estate agent. Home selling and buying used to be expensive until the emergence of flat fee brokerages, discount brokerages, and completely commission-free Proptech real estate companies like Richr.

With Richr, you don’t pay a flat fee or a percentage to real estate agents. We help home sellers list commission-free, and we help home buyers find their dream home and claim 100% back of the buyer’s agent commission at closing. If you sell and Richr finds you a buyer, you keep 6%, and if you then go on to find your next home with Richr, you keep an additional 3% in equity. In totality, you keep as much as 9% in equity when you empower yourself to transact using Richr.com. 

How does coronavirus effect work environments?

Corporate companies may find that there’s a need to shrink head-offices and make it a policy for workers to work in office-like environments at home because of social distancing. If more and more workers stay at home, this could lead to a rise in home offices. As the need for home-office environments rises, we could see the rise of WeWork-like businesses solving the need to find home-office locations. Consider, for a moment, a subscription model where members pay a fee to find a home to use as an office. Homeownership as a service could be the model of the future.