Commercial Real Estate Investing in the Time of Coronavirus

No question about it: These are interesting times. Oil prices recently hit negative value, and a novel coronavirus has kept most of us home for months. The stock market has bounced around like crazy, causing lots of investors to lose their shirts. Who could have predicted it?

Well, many economists sort of did. There is a theory that since the late 19th Century, the U.S. economy has been on a repeating cycle that lasts an average of 18.6 years. According to this theory, every 20 years or so there is a major economic event, including a crisis. In 2020, that’s been negative oil prices coupled with COVID-19. Twenty years ago, it was the dot-com crash and 9/11. Twenty years before that, it was the Iranian Revolution and the energy crisis—and so on, for more than 100 years.

While today’s economic conditions may feel unprecedented, they aren’t. As investors, we have to keep level-headed, knowing this economic situation is very temporary, normal, and predictable. I don’t think this is the end of a cycle where everything crashes. I think this is a mid-cycle correction.

In the first half of a cycle, the economy is always amazing. Since 2010, there have been 1,500 all-time highs in the stock market’s value. It’s crazy! But now, oil prices and the virus have put a hurt on the stock market. People are pulling out, looking for somewhere safe to stash what they have left.  A whole lot of them are going to invest that money into commercial real estate.

When the cycle turns, we see people take their money out of the stock market and put it in real estate in the second half. Real estate is much more stable and tangible than stock: You can get insurance on it; you can see it and use it. I am not predicting that we are about to see low prices on commercial real estate—far from it. There will not be any more deals in real estate in the next 7–8 years than there were in the last 7–8 years. This is not going to be like 2008.

But there are going to be a lot of people investing in real estate. There will be a lot more deals made and a lot more credit. As part of the PPP government bailout stimulus, large banks and small banks alike have been granted billions. The government and banks will be giving out a lot of credit as a form of stimulus. A lot of that will be going into commercial real estate. After about 7–8 years, that cycle will end much like we saw in 2008.

Right now, what we are experiencing is a pause in the game, a chance to get up from the poker table and take a stretch. When this pause is over, it will be game on. Credit will be everywhere soon, then capital will be everywhere. Everyone who just lost their shirt in the stock market will want to put their money somewhere where they’re not going to lose it. The commercial real estate market will be flush with cash and credit. If you are confident and you are educated in this business, right now the world is yours in commercial real estate.

As all smart investors know, the time to invest is when there is blood in the streets. Emotions are heightened right now; people are scared. Make smart investments right now and watch their value skyrocket as the money floods into the commercial market. We are living in interesting times, and interesting times are when investors get rich. Make smart plays, and when the cycle ends in another 7–8 years, you’ll be ready.