I was asked by someone what I think about commercial real estate in the coming days.
I think in the short term at least it is going to be hit really bad. Many companies have already announced that the majority of their staff will work from home till December 2020. Lots of companies have fired a large percentage of their employees and most companies are thinking of contraction in the near term with attention focussed on surviving harder times rather than creating and expanding with new offices and workforce. All this leads to a shortage of tenants in the short run.
Of course, like in every crisis, it seems this is the end of the world with media advertising confusion and bad news like crazy and people constantly consuming it.
But let us not just look at the coming few months. Let’s look at the longer term. Compared to all other countries in the world India is best placed right now due to its young average age of the population, cheap labour, lack of infrastructure (meaning BIG scope of improvements) and probably the share of business we plan to snatch from China (everyone wants that). Read a book called “The Demographic Cliff” by Harry Dent Junior, where he clarifies why and so forth and also compares the entire globe. India is very well placed and we will have to really mess it up very very badly to not come out on top and flourish immensely. We have done well with all the bad things and corruption and scams etc. so I don’t think we will mess up that much in coming times either. I think we will do well. I personally see 2022 onwards a very good start of high growth for our economy.
Now it is all very interesting for companies to ask their employees to work from home but come on! The quality and discipline suffer very badly when one “works” from home. They are not going to be able to sustain much longer. Also, this panic will end and people will not be in terror like right now. Sooner or later they are going to need everyone reporting to the offices and actually working and producing a product, not just reporting that they worked. The companies are going to need more office spaces in the long run and more and more companies are going to come here. They don’t have an option. We are just too many consumers and very well placed to be global leaders in growth. Where else are they going to go?
So, in the coming days, the commercial real estate is going to be hit really bad and may lose a lot of value and rentals may also crash. A lot of properties may get vacated and stay vacant for a while. With panic, maybe a lot of distress sales will take place and as usual, the smart ones will buy more and hold and get higher rental returns and capital values when markets normalise and go up again.
Stay strong and hold your fort. This is a major event and the main enemy is fear and panic is actually created for the most part. Sometimes we have to hit the bottom to be able to bounce back. I am betting on a very strong bounce back once the dust settles.