COVID-19 has impacted every area of both our professional and personal lives. It doesn’t matter what industry you’re in, what area of your industry you specialize in and what your role is in your company. Everyone has been affected.
That being said, some industry sub-sectors have felt tremors more than others. While there are a variety of these sectors in commercial real estate, today we’ll be taking a speculative look at the potential effect of COVID-19 on private equity real estate (PERE) in particular.
Why Private Equity Real Estate?
It could be argued that this sub-sector of commercial real estate is one of the most important for those invested in it. After all, due to their nonpublic status, investors will be interested in how COVID-19 will affect their closest investments. It’s also a sub-sector where CRE pros have the most flexibility and can jump on opportunities. Depending on your outlook, how COVID-19 affects the private equity real estate sector could play a large role in how your overall investments play out moving forward.
Three Different Outlooks
Of course, how COVID-19 affects PERE is the big unknown here. The numbers are changing day by day and there are several different potential scenarios to think about. Right now, the best we can do is speculate. Here are three different potential outlooks to consider:
- Negative: This outlook would likely be based on recent reactions and shutdowns that impacted the sector immediately after the coronavirus began to spread. What if offices are shut down again? Deals would be halted, cash preservation would be a priority and cost structures would need to be protected. Not an ideal scenario.
- Neutral: There could be no decline to PERE investments and investors would simply need to focus on managing costs and liquidity inwardly. This presents the least amount of risk, yet lets PERE investors pursue any opportunities that come along.
- Positive: Another outlook would one that is at the heart of PERE investments: an opportunity to scoop up properties as values fall. (Buy low, as the saying goes.) This strategy was popular in the 1990s and it may be popular again in the 2020s.
How CRE Software Can Help
Regardless of the outlook you have on how COVID-19 will affect private equity real estate moving forward, having insights and up-to-date information is crucial. Commercial real estate software can help in this area by automating the data for your PERE investments and letting you organize it as you see fit. Take notes on observed changes, create critical date reminders and keep up with the market, all in one tool.
If you’d like to see how Quarem can potentially help with your PERE (and other) investments moving forward, request a demo today.