FA Magazine July/August 2021 - Page 57

college plAnning | estAte plAnning | insurAnce | investing | portfolio spotlight | REAL ESTATE | retirement | tAx plAnning

Real Estate Shakes Off Covid-19

2020 was a double-edged sword for real estate investors .
By Karen DeMasters

SINglE-fAmIly HOmES ARE flyINg Off the shelves . Commercial real estate is struggling . But whatever you might say about the real estate market , you can bet the situation won ’ t remain that way for long . Those familiar with the market say residential real estate is already starting to cool off after the boom that started late last year . And yet at the same time , commercial real estate ( including offices , warehouses and business sites ) is seeing light at the end of the Covid-19 tunnel .

Nothing is static in this business . Different types of investments face their own different pressures .
“ last year , there was concern regarding how commercial real estate would weather the pandemic ,” says Raj Dhanda , CEO of Black Creek group , a real estate investment management firm based in Denver . “ Despite this concern , we believe fundamentals are healthy , especially in the industrial and multifamily sectors . Commercial real estate is emerging from the pandemic strong and stable , and we are seeing an increasing interest in private real estate .”
“ leadership in the real estate sector can ebb and flow as market forces impact residential and commercial real estate differently ,” wrote Cinthia murphy in a report on ETf . com , a research and analysis firm for the exchange-traded funds market . “ If 2020 was a banner year for housing , 2021 is shaping up to be a great year for commercial real estate .
“ Housing ETfs rallied to record highs in the past 12 months or so as inventories dwindled in the face of ever-growing home buyer appetite and mortgage rates at multi-decade lows ,” murphy said . However , “ we know that market narratives certainly do change on a dime .”
Others who track the divergences in the various sectors of the real estate market agree .
“ Today , the issue of a robust recovery [ from the 2020 economic shutdown ] is no longer a question of if , but rather when ,” says Calvin Schnure , senior economist and senior vice president for research and economic analysis at Nareit , the National Association of Real Estate Investment Trusts . “ Vigorous growth over the remainder of this year and next year will spur the demand for all types of commercial real estate and help stimulate a stronger recovery for REITs .”
There is a new “ unevenness ” in the real estate market , in part because of the impossibility of restarting the economy all at once , Schnure adds .
Drew Reynolds , the chief investment officer of Realized Holdings in Austin , Texas , noted that residential property “ came out roaring ” late in the pandemic . “ Home prices were up pretty dramatically . Prices are not going to come down , although they will stabilize .” Realized Holdings is a support organization for real estate investors , especially for 1031 exchanges . ( Section 1031 of the Internal Revenue Code allows real estate sellers to avoid capital gains taxes on the profits
July / August 2021 | finAnciAl Advisor mAgAzine | 53