CHICAGO – (Realty News Report) – As the COVID-19 pandemic continues to reshape daily life, many city residents are reconsidering urban living. Real estate experts say concerns about crowded public transit, congested sidewalks, and heightened health risks have driven a noticeable interest in less dense living environments.
A recent survey conducted by the Counselors of Real Estate highlighted the pandemic and its far-reaching consequences — including economic decline — as primary concerns among its members. The organization published its Top Ten Issues Affecting Real Estate during a webinar presented exclusively to members of the National Association of Real Estate Editors (NAREE).
Data from an early May Harris Poll cited by the Counselors indicated that nearly 40% of city dwellers were contemplating leaving metropolitan areas because of anxiety about the virus and the pandemic’s economic repercussions. Residential agents have reported growing buyer interest in suburban and rural properties in recent weeks as people seek more space and perceived safety.
Businesses are also adjusting. As part of the movement away from dense downtown cores, some corporations are exploring or establishing additional offices outside central business districts. That shift reduces employees’ dependence on mass transit, changes commuting patterns, and could reshape urban office demand.
“The change wrought by the COVID-19 crisis and its aftermath will teach us about priorities, resilience, and demand in ways that we did not dare test before,” said Michel Couillard, 2020 global chair of The Counselors of Real Estate. He emphasized that the list of Top Ten Issues for 2020–21 reflects a complex, interrelated set of trends that overlay a rapidly changing real estate landscape.
Couillard noted that evaluating real estate markets requires assessing current fragility, adaptability to emerging needs, and potential relevance to new markets. “Demand will be defined by the extent to which this crisis leads us to abandon old habits and adopt new ones. The duration of lockdowns has been a factor, and so is the confidence with which we emerge,” he said.
Economic renewal ranked second on the Counselors’ list. The U.S. economy showed signs of slowing even before the pandemic, and the public health crisis has intensified those pressures. “There were a number of statistical signals of deceleration for those willing to see them,” Couillard observed. He warned that sectors such as leisure and hospitality, retail, construction, and air travel will experience slow and partial recoveries, likely extending into 2022.
The organization highlighted that state and local tax revenue declines caused by lockdowns could reduce public-sector employment and delay or cancel important infrastructure projects. Those fiscal strains raise the prospect of an unusually volatile recovery pattern for the broader economy.
Couillard estimated that post-pandemic economic growth may be constrained by a lower long-run potential GDP, around 1.5–1.6 percent, calling it the “new normal” for which policymakers and market participants must prepare.
Capital market risk was identified as the third major concern. The past months showed how swiftly debt and equity liquidity can recede when risk and returns become hard to assess. Volatility surged in March and April, making debt pricing more difficult and contributing to heightened uncertainty about defaults and losses.
“Federal intervention helped to limit a complete seizing of the markets, but it doesn’t necessarily mitigate longer-term concerns about defaults and losses,” Couillard said. While pricing stability and liquidity have partially returned, late payments and loan defaults have increased, and distressed assets are expected to come to market as tenants, property owners, and lenders feel the economic strain.
“2020–21 will be a significant period for distressed assets,” he added, pointing to the likelihood of more properties becoming available under financial distress as the impacts of the virus continue to unfold.
Beyond the top three, the Counselors’ full list of Top Ten Issues also includes: public and private indebtedness, affordable housing, the flow of people, space utilization changes, technology and workflow adjustments, infrastructure needs, and Environmental, Social, and Governance (ESG) considerations. Each of these topics intersects with the pandemic’s effects and broader demographic, economic, and technological trends shaping real estate.
The Top Ten Issues Affecting Real Estate is produced by The Counselors of Real Estate’s External Affairs Committee. The list is developed through identification, debate, and voting by the organization’s general membership, reflecting the collective insights of experienced real estate advisors.
June 25, 2020 Realty News Report Copyright 2020
NAREE will hold its annual Real Estate Journalism Conference in Miami Sept. 23–26, 2020.