It's a complicated time for most industries, including commercial real estate.
Local commercial firms are working through issues that include landlord-tenant relationships, working remotely, sales that were in the works before efforts to slow the novel coronavirus and more.
Mark Johnson (pictured below), executive vice president/sales manager of Coldwell Banker Commercial Sun Coast Partners, talked about what his Wilmington-based firm is doing during the pandemic.
GWBJ: How is your firm coping with the local effects?
Johnson: "We’re considered to be 'essential' so have remained fully operational but with most of staff and brokers working remotely, doing virtual tours, etc. Demand is down right now, so it makes this a little easier. We’re still seeing leases getting signed, sales getting to the closing table, but it’s at a lower level.
"We’re taking time to touch base with our clients to see how they’re doing personally, and counsel them on options/alternatives we’re aware of. For now, transactions are less of a focus as we provide guidance in the hopes our clients can weather this storm."
GWBJ: Have you been working with commercial landlords and tenants on the issue and if so, how?
Johnson: "Yes. We have a property management division that of course supports landlords. But in many cases, one of our brokers placed one or more of that landlord’s tenants in the building. So we’re trying to help from both sides. Depending on the business, some tenants are in severe distress, but in most cases, landlords are working with them to abate rent for a time. There are many creative ways to make this work for both parties as it turns out."
GWBJ: What is your office situation like now?
Johnson: "As mentioned earlier, we’re mostly working remotely. We have set times of day when staff will go to the office, set out keys, sort the mail, process checks etc and we allow other brokers to visit the office to pick up keys or checks while maintaining physical distancing. We’re closed to the general public, but are available to them remotely.
"This whole process of hosting Zoom meetings while people are working from home gives us a glimpse into people’s lives we might not have been aware of. Some hilarious situations have arisen, and people’s pets/children often steal the show. I’ll miss that part - it makes us all remember we’re human beings with lives outside of work.
"In fact, we’ve had members of our CBC family lose loved ones or deal with this illness within their families. Others are living with high anxiety because their spouse or parent has significant underlying health issues that would indicate a very poor outcome if they contract this disease. This is real, and it’s here."
GWBJ: How are brokers staying in touch with clients?
Johnson: "In a variety of ways. We try to communicate with our clients they way they prefer. I.e. some prefer phone calls, others texts, etc. And again, right now we’re most interested in making sure people are doing OK, and offering advice where we can to make this insanity a little easier."
GWBJ: Are people buying commercial real estate now? Why or why not?
Johnson: "Sales have been quite good as there’s still a lot of money in the market chasing yield. One of the methods of helping an owner/operator survive this crisis is doing a sale/leaseback where they can stay in their building, but get a cash infusion that’s desperately needed.
"Sometimes it’s even in their best interest to rent from a tax perspective. That said, transactions in the shopping center/retail world have ground to a halt. Medical office is still the gold standard, and other market segments such as residential land for development seem to still be chugging along."
GWBJ: Are they leasing space?
Johnson: "Leasing seems to be slowing -- but those deals are rarely dying (so far). They’re just moving out a month or two. Obviously this all depends on reopening the economy and how that rolls out. Most restaurateurs are dormant as would be expected, but there are bright spots. We’ve completed some office, a bakery and some industrial leases.
"Tenants in some cases are comfortable signing a lease because they plan to do some renovation work -- they’re betting that by the time the work is completed, we’ll be back to normal."
GWBJ: What's an example of a recent deal?
Johnson: "An industrial investment sale for $9.2 million. Industrial may end up being a bright spot as we collectively shift even further toward online sales, needing more distribution facilities.
"On the flip side, manufacturing/assembly may be looking at a bumpy road as supply chains are being disrupted and a lower level of demand could negatively impact them.
"Again, everything hinges on how and to what level we reopen the economy, keeping in mind it would be very easy to open up too early and see an absolutely catastrophic resurgence of the virus before we have effective and widely available therapies and/or a vaccine."
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