The end of 2020
Most of my readers might agree that we are glad that 2020 is coming to an end. 2020 is a difficult year may be an understatement. COVID-19 has changed our business practices and personal lifestyle/consumption behavior. Related to Essencap's financing practices, we have seen commercial real estate under great pressure exception in these two spaces; suburban houses and warehouses.
Due to changes in consumer travel and shopping behavior, the coronavirus pandemic has the greatest impact on the hotel and retail industries. Resuming leisure and corporate travel will take time unless vaccines are being distributed for mass consumption. Given that several pharmaceutical companies have announced the effectiveness of the vaccine, the light in the tunnel is near. We are hopeful federal approval and large-scale distribution are completed soon. Otherwise, the discovery plan will be difficult to imagine.
The retail industry has been hit by changes in online shopping consumption behavior. This happened even before the coronavirus pandemic. Increasing work from home is currently common practice, not an exception in many cities, and it will continue to develop on a larger scale. The retail market will be under greater pressure given consumers prefer to spend time online go to a store.
Office space is no exception, work from home will put greater pressure on the office’s demand. The governments encourage citizens to stay at home. This decision also is supported by many small businesses and corporations. This increases the landlords' risk in lease renewal result in a reduction of rent or vacancy. Most tenants hope to be able to flexibly evaluate the pandemic Long-term effects and the resulting economic contraction
We have seen apartment landlords investing in providing free rent or higher tenant improvements and concessions to retain and attract tenants. Those that can be successfully transformed into higher standards and comply with local health and safety department guidelines will become more desirable. The effect is costing capital while reducing landlord returns. The result is asset valuation will come under pressure. The second wave of infections may extend the duration of the economic recession and delay economic recovery. Fortunately, we see two spaces with good news, increasing demand for suburban houses and warehouses. As many renters move out of the urban environment, many renters choose more open living environments. In addition, our e-commerce customers also benefit from online shopping behavior. Many of our customers have run out of rental space. Due to cost reasons, many preferences are to gain space to reduce costs. In view of the low-interest rates, many of our customers can obtain reasonable price warehouses at low-interest rates to reduce costs and increase company assets.