Your sense of time may have blurred dramatically over the past month and a half of isolation and repetitiveness, but we’re now nearly two months into the coronavirus outbreak, and its effects on the Northland are coming in to view. Northland Connection reached out to several local and regional commercial realtors to see how the virus has affected the regional market.
“Covid has had a dramatic effect on commercial real estate,” said Dave Holappa of Holappa Commercial Real Estate. “Some lenders have completely stopped funding any commercial investment real estate, citing credit concerns. Additionally, businesspeople are unsure of what the future will bring and, therefore, are not making changes with regards to their real estate. Landlords are concerned rents may very well go unpaid. We are seeing commercial tenants being unable to pay rents as well.”
“Essentially, there has been a pause in action,” added Greg Follmer of Follmer Commercial Real Estate, which currently has the largest inventory of properties on Northland Connection. “Our overview is that the market is going to be very rough over the next 3 months, with improvement in the fall, and normalcy in Q4 2020 to Q1 of 2021, and that the stimulus package is powerful and rapid in response, which will help.”
Still, while a handful of deals have fallen through and others have been put on hold, there is still steady activity. Northland commercial realtors noted that several sectors, such as industrial and multi-family housing development, continue to see strong deal flow. Hotels, retail, and food service, meanwhile, have been “devastated,” and small business retail may continue to struggle with lower activity. A current backlog could lead to an outburst of deals once conditions make it possible.
The realtors’ observations align with trends observed by regional and national analysts. Some markets remain hard to predict: a Minnesota Real Estate Journal panel on the office market saw complicated effects. Some office tenants are seeking ways to expand work from home options and shrink their footprints. On the flip side, the vogue trend toward open workspaces is far less conducive to social distancing, and some office tenants now have a reason to seek out more space, as Delta Air Lines’ recent Iron Range call center expansion shows. And if the supply chain challenges of the coronoavirus world lead to backlash against offshoring, places like the Northland might stand to benefit.
“There are some ingenuitive entrepreneurs out there that are doing well, and even growing or starting new profit lines for their business,” said Follmer. “So there are some silver linings as well.”