I always love spring in the Rocky Mountains, to see the pull of the seasons with snow and flowers starting to bloom.  Eventually spring always wins 🙂  If you read the news, it sounds like the world is crumbling with 22 million jobs lost and a predicted 30% GDP decline. Is everything as bad as the media is portraying?  What about real estate?

Don’t get me wrong, the economy has hit a rough road, but is the sky falling?   I’m very skeptical!  The country is at an inflection point but the sky is not falling.  What does this mean for the economy and real estate?

What is in the numbers?

On the surface the economy looks terrible with 22 million jobs lost and a 30% GDP decline.  Unfortunately, these numbers do not portray the true story.  The economy will not stay shut forever so the 22 million are likely not “lost” but more transitory.  Don’t get me wrong a number of these jobs might not come back, but it will be substantially less than 22 million as people will go to restaurants, go to stores, etc…

The same is true for the headline that there is a 30% GDP decline, this is not an annualized number as the economy will start moving.  There is no way that the economy will close for the year 2020, it will come back and the GDP decline will be substantially less.

American ingenuity excelling

Although the headlines portray a radically different picture, the virus has caused a radical transformation in the United States.  Businesses are being forced to adapt to the new paradigm on the fly.  A good example is my recent visit to Walmart.

I recently was the family nominee to go shopping and I went to a Walmart supercenter.  I was  amazed at the rapid transformation due to the Coronavirus.  Overnight almost all the checkout stands had been removed in favor of self checkout with one person manning 20 or so stations.

I was a bit skeptical as I entered the self checkout as historically it has been a pain in the a**.  It was surprisingly easy.  A scanning gun was provided and the pesky alarm every time you didn’t leave your bag beside the scanner was disabled.  I also was buying some alcohol (have to make sure we have all the necessities 😊) and when I scanned it a checker manning all the stations quickly came up check my id and I was done.  The process was seamless.  Walmart basically moved 30 employees from checkers to other roles to keep up with the surge in demand.

Walmart isn’t the only one adapting on the fly, companies throughout the country and economy are making radical changes.  For example there have been amazing breakthroughs in medical testing, ventilator construction, and take out ordering from restaurants are all getting radical overhauls in weeks as opposed to years.

What does this mean for real estate?

The increase in ingenuity will have lasting impacts on real estate as well.  Below are a few examples from commercial real estate:

Automotive:  Car dealers have been forced to move 100% online to sell vehicles in the age of Coronavirus.  When the pandemic eases, why will auto dealers need the extensive showrooms they had before.  Many buyers will continue to purchase vehicles online.

Medical: you will see a much great move to telemedicine that will greatly increase the efficiency in the medical field.  If you have a minor cold, you can get on with your doctor without going into the office.  This will allow existing facilities to be repurposed for other uses during pandemics.

Real Estate Sales: The coronavirus has forced the real estate to rapidly evolve.  Open houses are a thing of the past, in person showings may not be available, and realtors are no longer physically meeting with clients.  The digital revolution that has alluded the real estate profession is coming down the pipe very quickly.  For example, closings can now be done totally virtually without ever going to an attorney or title office via a zoom call.  This is just the beginning of the real estate digital revolution.

The silver lining

Both employment and GDP numbers are transitory, they make great headlines, but not really meaningful when annualized.   There is a silver lining in all the turmoil.  American ingenuity is at the highest I have seen in my lifetime.  We are undergoing another version of the industrial revolution, but this one will be the automation/efficiency revolution.

Radical change is occurring throughout the economy as businesses either adapt immediately or get left behind.    Although the virus is a short-term event, the radical changes it has caused to the economy will be long lasting.  Now would be the time to turn off the news and relish in the innovative trans-formative changes.  Are you going to seize the opportunities in the new paradigm or ponder over the news of the sky falling?

 

Additional Reading/Resources

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Written by Glen Weinberg, COO/ VP Fairview Commercial Lending.  Glen has been published as an expert in hard money lending, real estate valuation, financing, and various other real estate topics in Bloomberg, Businessweek ,the Colorado Real Estate Journal, National Association of Realtors Magazine,  The Real Deal real estate news, the CO Biz Magazine, The Denver Post, The Scotsman mortgage broker guide, Mortgage Professional America and various other national publications.

 

Fairview is a hard money lender specializing in private money loans / non-bank real estate loans in Georgia, Colorado, Illinois, and Florida. They are recognized in the industry as the leader in hard money lending with no upfront fees or any other games. Learn more about Hard Money Lending through our free Hard Money Guide.  To get started on a loan all we need is our simple one page application (no upfront fees or other games).