“May you live in interesting times”

April 14, 2020

Or so goes an old questionable proverb. Perhaps One day we’ll look back on the Covid-19 pandemic as just that – an interesting time. But that’s certainly not how it feels now. Global Pandemic. Shelter-in-place. Massive layoffs. Unemployment. Hundreds of thousands infected. Rising death rate. And a run on toilet paper?!!?

As apartment building owners we are providing one of the most essential services to much of the Bay Area population – housing. And it is very likely that by the time you are reading this we will be recognized as either a villain, a savior – or both. Many will see this as a time to care for the well-being of their residents and work-out a payment plan in the event of hardship caused by the coronavirus. Regardless, the future of our industry will in part be determined how we respond.

There is much we can do to assist right now. The California Apartment Association calls upon every rental housing provider to support CAA’s Californians Safe at Home Guidelines. You can read about these and more at CAA’s website: https://caanet.org/coronavirus-resources-for-navigating-the-outbreak/. These are sensible guidelines at CAA’s free website resource for building owners and definitely worth your time.

What else can you do? For Starters, be sure to communicate with all your tenants. See CAA’s website for a sample letter to send your tenants along with the Covid-19 fact sheet from the CDC which can be downloaded from the CAA website. You can also take proactive measures such as regularly cleaning and disinfecting common areas or limiting usage or even shutting down common areas. Above all, though, work with your residents if they are financially affected.

While it’s still too early to tell the impact this will have on the rental market, I think we can all agree it’s not a good time to be renting units. So keep yourself and your tenants safe.
As for the sales and rental market, only time will tell. There will be buying and selling opportunities. Indeed, I just drafted an all cash offer for a client wanting to buy a property at “ground zero” as he called it, because he sees great opportunity. Others may want out. Either way, the market will respond.

Remember that commercial real estate is not a hyper-efficient market like that of the stock, bond or commodities market – it takes time for CRE to be impacted. Although CRE has been dramatically impacted over the past month by buyer uncertainty, there remains a window in which investors can sell certain properties for the same or similar sales price than before the pandemic.

Keep in mind that as rents drop so does the value or your property. While this will keep some from listing, opportunity arises for those keeping their rents up and their properties well-positioned. With the securities market at a low, investors will be looking for a safe harbor, and real estate has historically filled that need.

And although our national economy is seemingly heading over the precipice, locally deals are still getting done. There are still many investors looking for properties in this area. Why? Because the fundamentals of the Silicon Valley job market remain strong. This is the center of high-tech – an industry which has seen an increase in demand for many services as a result of the shelter-in-place order. Many high-tech companies are seeing an increase in demand. This is no surprise. Economists are saying that Silicon Valley and the Bay Area should weather this storm better than most regions.

So whatever you do, don’t panic. As investors we’ve seen downturns before and we’ll see them again. If you have a question about the market, your property, a tenant issue, or just need to hear a friendly voice, feel free to call me at 408-356-1900. I’ll be here and working straight through these “interesting times.”