NEW YORK CITY- Although the Federal government along with the Federal Reserve are trying to inject liquidity into the marketplace due to the coronavirus shutdown, it may not be enough to make commercial real estate reappear as a Candyland for capital allocators due to a dip in property values, Aaron Appel, senior managing director at Walker Dunlop in New York, tells GlobeSt.com. “It will be very difficult coming out of this right away to see where values will be,” Appel said.
For investors to assess, they’ll have to look at the income-side to see where rent flows are to understand the value. The potential deals that will get underwritten will have trouble determining where cap rates will fall, he said. “There will be a period of disruption on the income side, however, overall right now it is too opaque to determine right now,” Appel said.
Congress is thumbing the approval of a $2 trillion bill to help small businesses and low-income families to stay afloat, which is a big concern for landlords who foresee their tenants falling short on rent payments. However, which companies will sustain themselves remains unclear in the present moment. “The problem is we don’t necessarily know which companies will weather the storm and make it through,” Appel said.