I had thought I would comment on the immediate, near term and potential long-term implications of COVID on commercial real estate as an asset class. But there has already been extensive commentary on the plight of retail and lodging, uncertainty in office (more or less, flight to suburban?), and resilience of logistics and multifamily. The capital markets are very quiet, not unusual for summer months but even more striking with extreme volatility in fixed income shutting down CMBS, banks overwhelmed while assessing their exposure with fully drawn lines from borrowers and administering QE through the PPP, and private credit limited in liquidity with pullback in loan on loan activity. There is very little sales activity, as forced or distressed selling has not widely occurred yet and there is a big gap between buyer and seller expectations on returns/value. So today on June 19, I am thinking about larger issues that impact us all as an industry, as a nation, and as world citizens.
The broader societal and long-term implications of pandemics combine with intense focus on issues of social justice and equal opportunity at a time when our country is deeply divided with a presidential election rapidly approaching. So, I will ask a question that has real estate implications. How do we get our house in order? Continuing with the real estate investment analogy, I offer some ways to consider this: (1) Target investment at an appropriate return on capital (think education, housing, job training); (2) Create and maintain products that attract and retain tenants (think education, housing, job training); (3) Active portfolio management for strategic direction and risk mitigation (think best minds, strong leadership, decisions supported by data and analysis); and (4) Intense asset management (think blocking and tackling at the local level to implement strategic plans and react quickly to variance, watching the budget closely and being a steward of investment capital). I by no means intend to oversimplify the issues. This will be hard work. How do we as an industry move our nation forward in a positive, civil way toward greater and more equal opportunity? The cost of not being prepared for pandemics has been immense. The cost of inter-generational racial inequality has been immense. These are issues that we can tackle together if we do our part to create healthy places to live and work and we get involved in the community to support, mentor and lead.
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