The COVID-19 pandemic hasn’t affected all asset classes equally and as such, we can’t expect them all to recover equally. Some are likely to quickly snap back to their previous levels, pre-pandemic, while others will have to fight their way back over the coming years.
Asset classes are groupings of similar types of investments. The general types of asset classes are as follows:
- Equity (stocks): owning part of a company
- Fixed Income (debt): lending money to a company or government for interest (such as government bonds)
- Cash and cash equivalents: the money in your savings account or stashed away in the cookie jar
- Real Estate and Commodities: owning something physical like property, natural resource commodities, or precious metals
The primary differentiator between which assets will likely resurrect quickly versus which will not, is whether or not the government is allowing for usage. The fear of using them is also a factor. For example, theme parks and concert venues are currently prohibited from operating. As a result, their post-pandemic recovery will be a long road, only beginning once there is a vaccine and mass reopening of all venues.
Healthcare, on the other hand, is an asset class that will have little difficulty recovering from the pandemic. It’s classification as an essential industry has protected the healthcare industry from a large part of the fallout from the economic recession. Certain aspects of the healthcare industry have struggled at points during the pandemic (think school nurses and specialists), as restrictions have lifted, they have recovered large portions of their previous market share. After 10+ months of COVID, most people are overdue for doctor’s visits, dental cleanings, and the regular day to day maintenance of life.
Office properties, however, are a different story.
While offices have been holding onto the hope that they will eventually return to in-person work, that becomes less and less a part of the “new normal”. With the concern for how to adjust building layouts and common spaces, the biggest question is whether businesses are likely to permanently adjust to remote work at least in part, if not 100%.
Should remote work be here to stay, the commercial real estate industry is likely to see a significant downturn. If companies make the decision to vacate their commercial spaces. The next phase in CRE development may pivot to mixed-use spaces or some new idea as yet undiscovered.
The housing market asset class remains under close watch. While the effects of COVID-19 on our economy have been catastrophic to some family’s ability to maintain their regular standard of living, others have recognized new needs. As office buildings close and employees have moved to remote work, many have recognized the need for more space at home.
Because of this, the seller’s market has boomed and offers are being submitted, accepted, and put into escrow in record time. This has a knock-on effect for bankers who are experiencing record low-interest rates and increased interest in commercial and residential loans.
As asset classes rebound, fluctuate, and experience their own effects of the pandemic, we at Innovative capital know that business is still being done. For many investors, this is the perfect time to seek opportunities for new real estate purchases. At the same time, rents have been put on hold and increases are strictly off the table in this climate. As investors seek funding, they are seeing stricter ratios being upheld. In these (and many other) cases, the team at InnCap can help. Our relationships with commercial bankers and private money investors allow us to provide funding connections that are the right fit for many loan applicants. If we can’t place the loan with the right commercial bank, we can bring in private money and take the loan a different route.
As you look at the opportunities that the economic instability has created, save the time of waiting months for your bank to approve a loan that you need in weeks. Call the team at Innovative Capital first.