In an Uncertain Environment an Analyst Counts the Reasons for Optimism

Uncertainty.

That is the key word for those watching the real estate market in the current COVID-19 world. As those in real estate – including regional malls, strip centers, freestanding such as gyms and banks, health care, apartments, industrial and hotels – manage the best they can in uncertain and anxious times, those that follow the real estate market say there is a reason to be optimistic.

“Generally, I’m an optimist while, at the same time, real estate is a derivative of society,” said Michael Gorman, managing director REITs, Equity Research of the New York City and San Francisco-based BTIG.

BTIG, a full-service financial institution with about 600 employees worldwide, has been giving its hundreds of client weekly research reports titled “Real Estate in a Post COVID-19 World.” To date, BTIG has published three of 27 weekly issues.

Gorman said those watching the difficulties of the real estate market play out in real time, “should keep in mind that, right now, the state of real estate is very uncertain. There are a lot of things going on now in scale and process that are unprecedented.”

Gorman, in an interview Tuesday with GlobeSt.com, said e-commerce is having an effect on many aspects of the real estate world. That, he predicts, will continue even after the pandemic dies down.

“Some big areas in real estate to think about are what will happen to retail, which encompasses strip malls, regional and some free-standing?” Gorman asked.

While there are many unknowns, Gorman did say, “There is definitely a lot of e-commerce use. E-commerce was growing before COVID-19. The question is ‘does the shift come back a little bit or is e-commerce going to be permanent at the levels we are seeing today?’”

Many, because of the pandemic, are using e-commerce, or online sales, for the first time, Gorman said. “There will definitely be a bounce back for essential retailers that are holding up well in the current situation, those like grocers, pharmaceuticals, dollar stores and fast food restaurants,” he said.

Gorman believes entities like restaurants and bars “will also come back pretty quickly. Then, though, there are challenges with things like entertainment concepts; places like movie theatres and bowling alleys and indoor entertainment. There could be a challenge there until people feel comfortable to visit them again. It might not be until we get a vaccine or a therapeutic cure to COVID-19. You’d also have to take part in social distancing, and that can be its own challenge.”

Another area that’s been talked about with regard to the impact of coronavirus, Gorman said, has been on hotels and the hospitality business.

“Hospitality is really struggling,” he said. “A lot of hotels are either severely limited in their offerings or it’s completely affected their business.”

Gorman continued: “The bigger names in the hospitality business have better balance sheets and are more durable. But, at the same time, small boutique operators have a flexible cost structure, so they can survive.”

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