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 Financial advisory
What Real Estate Asset
Classes are the Winners and
Losers from the COVID Crisis?
In May of last year, my article discussed the effect the COVID crisis could have on certain real estate asset classes. Now that this strange time may be nearing an end, (or is already over- depending on what state you live in), we may have a clearer picture of who the winners and losers are. Although the “race” isn’t yet over,
let’s take a look at who is in the lead, and who is trailing behind.
In that May article about Net Leased properties, I wrote about the appeal of “Necessity Retail:” Grocery stores, pharmacies, auto parts stores: places that stayed open for business during the entire downturn. The real estate market saw what stockbrokers would call a “flight to safety” last year that seems to be continuing: money pouring into this asset class sent prices soaring and saw properties selling quickly with very low inventory.
For Necessity Retail assets, I think careful attention needs to be paid to purchase prices. Has this asset class become a victim of its own success? Prices
in this group are remarkably high now. Will the high demand driving these high prices stay around permanently? I think we will see demand – and therefore prices – drop over the next few years as the market “normalizes.” In racing terms, Necessity Retail properties are way ahead, but I am not sure they saved enough for the last lap.
A lot of apartment owners are concerned about the impact of the nationwide eviction moratorium. Is this giving tenants a “free pass” not to pay rent? In my experience, the Covid calamity has stressed cash flows in a minority of the properties that we watch but has not been a potentially fatal blow. People will always need somewhere to live, so apartment buyers in good growing metro areas, with growing pools of potential renters, are giving themselves the best chance at success.
My partial-interest apartment investors tend to buy 200-400 unit properties. I have found that tenants in these larger communities prefer them to smaller options. Although some renters may be tempted
  Christopher Miller is a Managing Director with Specialized Wealth Management and specializes in tax-advantaged investments including 1031 replacement properties. Chris’ real estate experience includes work in commercial appraisal, in institutional acquisitions for a national real estate syndicator and as an advisor helping clients through over four hundred 1031 Exchanges. Chris has been featured as an expert in several industry publications and on television and earned an undergraduate business degree and an MBA emphasizing Real Estate Finance from the University of Southern California. Chris began his real estate career in 1998. Call him toll-free at (877) 313 – 1868.

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