Dino Tomasetti, JR Weighs in on the Future of Real Estate Development
Covid-19 has had devastating and far-reaching effects on the real estate industry as a whole. It is difficult to understand the full extent of the impacts at this point. Obviously, in the short term, it’s been fairly disastrous. People are not paying their rent, whether it is a multi-family tenant who lost his job or a business that has been shut down; in many cases, they simply don’t have the cash to pay their rent.
Dino Tomasetti JR, president and CEO, Asset Realty & Construction Group, says that the building and construction industry has faced challenges, as well. “Many construction and commercial development projects have been shut down as a result of the Covid-19 restrictions, and building departments have been working at reduced capacity, so projects are being delayed, which has strained developers and affected cash flow,” said Tomasetti.
Tomasetti believes that situations will correct themselves in the long run but recognizes that the global pandemic has fundamentally changed the way business is conducted.
With much of the US workforce working from home, video conferencing and networking applications have demonstrated that productivity has not been affected and that people are just as capable of maintaining acceptable workflow levels. This revelation may have a tremendous impact on future commercial construction projects for office buildings within large municipalities. Companies are re-thinking how they use office space and are crunching the numbers to understand if they need to offer a physical work location to run their business successfully. This may leave many office buildings empty, or re-purposed, and may halt new construction projects.
One area of agreement is that COVID-19 caught our nation off-guard.
“Our society has not seen anything like it for over 100 years, and, understandably, there were very few measures or safeguards in place to manage it,” said Tomasetti. “I think we all did the best we could to adapt. I think, in the long term, we will see more regulations related to maintaining a safe distance, wearing certain PPE, and implementing more sanitary practices within public spaces and workspaces.”
For the construction industry, Tomasetti says that “business as usual” will be re-defined.
For resourceful real estate developers, the challenges associated with Covid-19 have been difficult and fluid, but adaptable. Several creative ideas were implemented, including renegotiating leases, providing tenants the ability to defer some rent until the situation improves, and working with lenders to introduce some flexibility and short-term concessions.
“We are trimming our expenses and trying to run a more efficient business wherever we can for the short term,” said Tomasetti. “We are figuring out how to work within the restrictive guidelines, maintaining safe worksites, and safe places of business.”
Going forward, Tomasetti believes that lenders will require provisions within their loan agreements for pandemic insurance and perhaps forms of business interruption insurance to help reduce the impact of future widespread shutdowns of business.