May 05, 2020

Which Areas Are Good to Invest in Real Estate Today?

17 minutes

What is happening to retail during Covid-19? What is happening to offices? Which REITs could be good investments right now? Which areas are going to thrive, or not, during this crisis? Which asset classes should you keep in mind? Deidre Woollard is a writer and editor for Million Acres with two decades of experience covering all aspects of real estate.

You can read this entire interview here: https://montecarlorei.com/which-areas-are-good-to-invest-in-commercial-real-estate-today/

What are you seeing is happening in commercial real estate nowadays?

I think there's a lot of things happening right now. Certainly the biggest impact is definitely being felt in commercial across the hospitality and retail with so many closures in different states. We're starting to open up in various areas, but it's all still very tentative. And one of the things I think that everyone is worried about is is a secondary outbreak and another round of closures.

What do you think is going to happen to the real estate market, given your thoughts of where the shutdown is going, and if we’re going to have a second outbreak?

I certainly think it’s challenging, definitely certain sectors are being affected more than others and some sectors are benefiting a little bit. One of the things that we’re seeing is industrial real estate, there’s an ongoing need for last mile warehousing. Industrial was the top performing sector last year, and it will probably be a relatively strong sector this year. Whereas hospitality and retail are being very heavily affected. The revenue per room in hotels is at historic lows, and it’ll be a slow recovery for some of those sectors.

If you had unlimited funds to invest today, when do you think you would deploy that? And in which asset classes would you focus on?

One of the interesting things is that everyone is watching the residential real estate market and looking for prices to drop, and it doesn’t seem like that’s going to happen anytime soon, because supply and demand are pretty well matched right now. One of the sectors that we’ve been looking at over Million Acres is multi-family real estate investment trusts, for example. Multi-family was already predicted to have a pretty strong year this year. There’s obviously a lot of demographics that support multi-family continuing to grow. Household formation is on the rise. I feel like multi-family is still going to be strong, especially in those markets where you have a lot of tech employment. Places like Seattle, Charlotte is a good example. Southern states have really seen a lot of people moving in and so you when you have that high population, those are good spots for multi-family.

What do you think will happen to the retail sector?

It's an interesting sector because there are different parts of retail that will be strong and different parts that will suffer more. Simon Property Group is reopening some of their malls. As they’re doing this, they’re starting to put different rules in place in terms of how many people you can have in the mall, or an individual store, having hand sanitizers available, and things like that. But how much foot traffic can you have in a store? And how much foot traffic do you need in order to pay your rent? Cheesecake Factory stopped paying rent in April. The Gap had stopped paying rent. So the large malls are definitely having difficulty.

Deidre Woollard

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