As published in National Real Estate Investor

The COVID-19 pandemic closed the doors of many businesses and forced consumers to stay home, causing a ripple effect throughout the commercial real estate sector. As consumer spending changed in some areas and stopped altogether in others, businesses suddenly found themselves struggling to pay rents. Consequently, property owners came up short on their mortgages, which has left banks struggling to collect payments or renegotiate payment terms.

The impacts of coronavirus-related shutdowns vary based on the subdivided sectors that make up the commercial real estate industry. This article will take a quick look at each of these sectors and how the pandemic has impacted the ability of property owners to collect rent.


Many businesses that occupy office spaces were able to offer remote alternatives, thus allowing them to bring in money and continue to pay rent on their existing leases. While reports show that office tenants have mostly been on time with rent, many of those tenants now realize that their employees could work from home permanently to reduce the overall need for office space. As such, the long-term threat for office real estate comes later as long-term leases begin to expire.


Retail has undoubtedly been hit the hardest among commercial real estate sectors. Numerous large retail chains filed for bankruptcy, and that list continues to grow. Retail landlords have reported that 80 percent of their retail tenants didn’t pay their rent in May 2020. A survey of NYC restaurant owners showed that 80 percent of restaurants didn’t pay their full rent in June 2020, while 36 percent didn’t pay rent at all. Of restaurants that reported their businesses closed on Yelp, 53 percent reported that the closure was permanent. There’s little doubt that many retail businesses will fail to come back from their closures, which doesn’t bode well for retail property owners who are owed rent. Furthermore, capacity restrictions due to social distancing will make it much more difficult for remaining restaurants to be profitable.


The success of multifamily real estate ties directly to the economic health of renters themselves. While U.S. unemployment hit nearly 15 percent in May 2020 and remained above 11 percent in June, government subsidies and stimulus checks helped tenants to pay at least some rent. The National Multifamily Housing Council reported that 94 percent of renters had paid full or partial rent in June 2020 across the 11.1 million units tracked by the organization.  The real test will come later in the summer when the $600 weekly Federal unemployment bonus payments end.


The coronavirus pandemic has ground tourism and hospitality to a halt for months. Hotel occupancy fell more than 50 percent year-over-year in May. Even the most optimistic estimates place a full recovery for the travel industry at 2022 or beyond. Thousands of hotels are facing foreclosure as they can’t make their mortgage payments. Several hotel owners, including Blackstone, have missed large bond payments.


Of all commercial real estate sectors, industrial remains the strongest. Some subsets of manufacturing stumbled briefly, but most have been allowed to resume operations because of state re-openings and essential industry exemptions. Logistics properties lead the pack, however, as warehouses and distribution centers maintain record low availability in the face of increased e-commerce and booming online grocery sales. Industrial property owners reported less than a 3.5% drop in on-time rent collections. The need for additional buffer stock will further increase future demand.

Frank P. Crivello is the Chairman & Founder of Phoenix Investors, a national real estate firm based in Milwaukee, Wisconsin.