Your FP/CM Newsletter – 3Q 2020
HOW ARE REAL ESTATE MARKETS FARING DURING COVID-19?
CHRIS CONWAY, Portfolio Manager
There are few industries that have been as impacted by Covid-19 as the Real Estate industry.Whether it is concerns about the viability of office buildings due to “work-from-home” and “zoom meetings”, or the challenges for retail landlords in collecting rent because of widespread store closures, there is clearly significant uncertainty regarding the economic value and utilization of real estate assets today.
At FPCM we share these concerns; however we also believe there are a number of positive developments and opportunities within Real Estate markets. Many subsectors, including single-family homes, apartments, and industrial assets, as well as mobile home parks, telecommunication towers and datacenters, have retained their positive investment attributes despite Covid-19. These investment attributes consist of high levels of recurring revenue, high profit margins, difficult-to-replicate assets, a level of protection from zoning laws, and a hedge against inflation. Furthermore, with the decline in interest rates, the investment yields on real estate assets are becoming more and more attractive relative to fixed-income alternatives.