As the number of coronavirus disease 2019 (Covid-19) cases around the world continues to rise and the global economy is suffering substantial losses as a result, investors are starting to wonder how their investments would fare in the face of this pandemic.
For many, the current situation does not offer good news. Global markets have been taking massive hits over the past weeks, and huge sectors of the economy are now seeing their market values plunge. Big businesses, such as those in the travel and hospitality industries, have suffered major setbacks that would take years to recover from, and the stock market is seeing a lot of investors selling their stocks at a loss in the hopes of recovering their investments.
Well, what about the real estate industry? The truth is, all industries have taken a blow due to the pandemic, but that doesn’t mean real estate investors like you should start panicking.
Instead of panicking, this crisis period is the time for you to plan and strategize based on current market trends.
Now, with most of the population’s movement restricted and a lot of brick-and-mortar stores closed due to the lockdowns, demand for online items has skyrocketed. Businesses that have not gone online before the pandemic are now scrambling to build their online presence and stay in the competition, fast-tracking the market shift toward electronic commerce (e-commerce).
But what does it mean for you as a real estate investor? if this trend toward e-commerce continues, there would be a drop in demand for commercial spaces. Now that you know that this is a distinct possibility, it would be best for you to start investing in industrial spaces. Once more and more businesses start hitting the online market, business owners are going to need more warehouse space for their items. They would need more manufacturing space for their products as their businesses go global. So if this trend continues, industrial spaces are among the most promising assets you can invest in, as property values for this type of space are bound to skyrocket and yield a high return on investment (ROI).
The second thing you need to understand at this point in the crisis is that the current economic slowdown would not necessarily affect your current ROI from your property investments. This is because diversification of your real estate investments can produce income streams that are not dependent on the country’s gross domestic product. Rental income is a good example.
In fact, did you know that rental income actually makes up half of total real estate investment returns? Property values may be affected at this point, but if you have leased your properties, fluctuating property values should not pose a big problem for you anytime soon. This is especially true if you have long-term lessees, such as for your office buildings or other commercial spaces. So if you have this income stream, you are most likely to survive this economic downturn, even if stock prices are crashing at record levels.
The third thing you need to understand is that real estate investments are more stable than other forms of investments that are on the high-risk side. An example of a volatile form of investment would be stocks. Current events dictate much of stock market values, which is why global hysteria over the pandemic has caused the global market to become a bear market.
Property values, on the other hand, are more stable and are dependent on factors other than the current economic situation. For example, property values can increase based on expectation of economic growth. And since property investments offer a diversified income stream, there’s no need for you to start liquidating your real estate assets out of panic. You can continue earning from your investment while avoiding unnecessary losses and expenses.
So what will happen to your real estate portfolio during this pandemic? Well, it might not perform the way it’s expected to, but property markets will eventually bounce back. In the meantime, you can take advantage of the economic downturn to continue investing in promising assets that you can now acquire at reduced prices. And since a lot of businesses and clients are transitioning online, it’s only logical for real estate investors like you to take advantage of this trend. For example, you can show your properties to prospective clients virtually, without leaving the safety of your home.
The fact remains that only those who are quick enough to adapt to the changes in the market can survive in the industry. By foreseeing the demands for commercial, industrial, and residential spaces, you can stay ahead of your competition and make calculated property investments that will yield the highest returns in the long run.
Posted by Mr. Richard Carvajal of The Manila Times on May 24, 2020
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6/14/2022 02:29:56 am
The important thing for real estate investors at present is to get prepared. This means you need to be strategizing, solidifying your access to capital, and evaluating multiple exit plans for investments that will not serve you during an economic downturn.
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