COVID Could Cause Real Estate Vacuum In Big Cities, Boom in Rural Towns
Based on trends spurred by the pandemic, Fitch Ratings is predicting a transformation in the real estate markets of big and small cities.
The way the COVID-19 pandemic is changing daily life may drive the population away from big cities into small towns, with businesses following, which will change demand for real estate, according to a new report.
Through an exploration of trends the virus has brought to retail, office, hotel and residential real estate, as well as the air travel and vacation industries, the report by Fitch Ratings, a global credit-rating and research company, makes some predictions for the future.
City center real estate may take a hit, since remote work-from-home arrangements make it possible for office workers to live further away from the office, said the Fitch report, “The Next Phase: Coronavirus Accelerates Changes to the Structured Finance Landscape.”
Housing shift
Newly remote workers may transform the residential real estate landscape because of a desire to move to suburban or rural cities. They need bigger homes to fit in their home offices, the report said. People also want outdoor living space because of their experiences during lockdowns.
One interesting side effect: service and leisure companies may follow the population exodus into small cities, which could mean revitalizing previously declining regions.
Within the big cities, there would be weaker demand for malls, non-grocery real estate and office space. Empty office and multi-family residential buildings may wind up meeting housing needs and bringing down housing pricing pressure in big cities, the report said.
Renting, rather than buying, apartments or homes may become more popular for several reasons. Some people may not be able to obtain affordable credit, while others will just feel uncomfortable taking on a big loan during the uncertain economic climate.
“This may significantly increase demand for rental housing, which should boost demand for single-family and multi-family rental properties,” said the report.
This could be different for student apartment complexes, since university classes are remote and fewer overseas students will attend because of how the pandemic has slowed international travel and impacted immigration figures. Some students may just attend college close to home, for budgetary reasons.