The commercial real estate market is one area that has consistently and continuously outpaced other investment vehicles. Virtually every city and even the most rural areas experience periodic construction booms.

New shopping centers, self-storage facilities, and mixed-use development areas are popping up everywhere. But the onset of COVID-19 brought countless proposed projects to a screeching halt. New construction and existing facilities, including many properties contained in REITs, have been heavily impacted.

Commercial Real Estate Investments

Real Estate Investment Trusts (REITs) have historically been attractive to investors as an interesting way to diversify their portfolios. Properties owned by the trust are effective investment vehicles for individual investors who would not otherwise have the opportunity to own or invest in commercial real estate. Managing a REIT requires a knowledgeable executive team and a hands-on approach to investing within specific communities. As demographic conditions change, investment opportunities could also be impacted.

COVID-19 Impacts Business and Investments

As the stock market teetered and plummeted due to pandemic conditions, economists began making predictions about businesses of all sizes across many industry sectors. Commercial property management companies took a hit as businesses were forced to close their doors.

Social distancing guidelines, loss of revenue, and multiple unknown factors drove investors to make radical changes. REITs were among the many investments to face scrutiny and uncertainty. The valuation process for REITs is a vital component for any potential investor to understand. These funds are thoughtfully compiled and actively managed to ensure viability. Specialized valuation firms like Appraisal Economics can help you understand the most important factors of any Real Estate Investment Trust before you make the decision to invest.

Short vs. Long-Term Projections

Financial reporting requirements vary based on specific investments and the relevant regulatory agencies. Only specialized valuation firms can accurately assess the foundation and financial stability of a REIT. The underlying value of a REIT is based on a number of unique and variable factors. REIT executives need the support and expertise of valuation firms to help balance the potential for risk and return before choosing an investment. Professional, comprehensive reports clearly outline all options and pertinent information that is necessary for competent consideration.

There are opportunities for long term financial gain from REITs, and it is important to understand the true potential given the current COVID-19 impact. Closures and loss of consumer disposable income contribute to lower-income projections in the short-term reporting period. However, the possibility for long-term growth is also great due to unfortunate changes brought on by the pandemic. Construction for vital structures such as grocery chains, residential developments, and institutional mixed-use facilities continue even during the economic downturn. These projects are creating jobs in the immediate economy and promising huge lease revenue potential over the next several decades. Short and long-term goals and results must be weighed against the current financial condition of the potential investors.

There is no way to deny the sudden and ongoing impact that COVID-19 pummeled on the economy. Commercial real estate has not been exempt from the effects of the pandemic, but they still have great potential for lucrative earnings. The only way to know for sure is to implement the findings of a comprehensive valuation report.