While the impacts of the coronavirus have been devastating, from a property perspective it has been a bit of a mixed bag. The hit taken by retail properties has been deep, with plenty of missed rent and bankruptcies over a variety of different store types. But other expected problems, like tough times with multifamily rent collection, have failed to materialize. The drop in May rent collections through the 20th of the month was less than 3% from the year before, at a still-lofty 90.8%.
What does this mean for property investment? Will the big troughs expected when the outbreak was first hitting the United States miss us or are they still coming? The answer to that comes down to two distinct questions. First, what property types represent good investment opportunities now. That one has been discussed ad nauseam. But the second question is a bit more interesting: When should investors go ahead and pull the trigger?
An unsurprising thing has happened as states around the country begin to relax their lockdown guidelines: Pent-up demand has people beginning to venture out to restaurants, bars, offices and stores. Even as we passed the tragic milestone of 100,000 deaths, numerous people have still started resuming their lives, in one way or another. These traffic maps, comparing activity on April 11 to May 24, are very illustrative in showing us the percentage of activity levels throughout the U.S. based on pre-COVID standards.
From a public health perspective this is a challenge. We don’t have a vaccine yet, and our treatment options are still limited, and herd immunity is not only far off, but also correlates to more suffering. Judging from the number of people out and about at parks in my city alone over the last week or two, it seems that a lot of people have taken the economic reopening as a signal that it’s time things return to normal. Despite the recent slowdown in deaths, the ramp-up in public activity will very likely lead to another wave of infections and deaths just around the corner. Remember that the coronavirus has a long incubation period. People with the disease could be spreading it to others for an entire week before beginning to show symptoms themselves.
As we discussed in our newest report, there has been a lot of talk about the $300 billion of dry powder sitting in reserve with investors across the country. For big investors with a cut of that funding and well-capitalized smaller ones alike, it’s a sad yet pragmatic reality that great buying opportunities will likely come in communities and property types hit hardest by the outbreak. Sick people, or people slammed with particularly restrictive lockdown guidelines, aren’t going to be turning the gears of the local economy to the extent that healthy, less-constrained people will be.
When you take that investment scenario and add a country full of people itching to…