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Coronavirus Has Caused Sharp Decline in Commercial Property Values
The financial impact of the COVID-19 pandemic is coming home to roost. The impact is hardly a surprise, since to prevent the spread of the coronavirus, hospitals canceled services and procedures, and restaurants shut down completely for inside dining, to look at just two examples. The impact, however, is starting to ripple beyond these initial events, and the fallout affects facilities at every point.
A sharp decline in the value of commercial properties is expected to take a big bite out of city budgets when those empty buildings are assessed in the coming months, according to The New York Times. For states, property taxes account for just about 1 percent of tax revenue, but they can make up 30 percent or more of the taxes that cities and towns take in and use to fund local schools, police and other public services.
The pandemic has upended America’s commercial property sector. In cities across the country, skyscrapers are dark, shopping centers are shuttered, and restaurants have been relegated to takeout service. Social-distancing measures have redefined workplaces and accelerated the trend of telecommuting. The $16 trillion commercial property sector is being stressed in ways not seen since the Great Recession of 2008.
According to Moody’s, the credit rating firm, commercial real estate values are projected to decline by 7.2 percent nationally from their pre-pandemic levels, bottoming out by the end of this year. The hardest-hit categories are the office and retail sectors, with values declining by 12.6 percent for offices and 16.5 percent for retailing.
Dan Hounsell is editor of Facility Maintenance Decisions.