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The COVID-19 pandemic has greatly impacted the global economy, as well as the way we live our daily lives. Therefore, it doesn’t come as a surprise that the real estate industry has been negatively impacted by the pandemic. Naturally, the housing market would change in the midst of a pandemic. However, the housing market is not the only aspect of the real estate industry that has been affected. The commercial real estate loan industry has taken a hit as well.

According to IBIS World, the commercial real estate industry, in general, experienced a major reduction in revenue in 2020 with an estimated drop of 17.8%. But why did this occur?

Why Was the Commercial Real Estate Loan Industry Affected by the Pandemic?

One of the reasons why the commercial real estate loan industry was heavily (and almost immediately) affected is that businesses had to shut down temporarily and, in some cases, permanently. Marketplaces emptied out. Restaurants worked with skeleton crews. Even hotels were much emptier than usual. Business owners that once planned on expanding or purchasing their first commercial sites had to put those plans on hold or shelve them permanently.

Additionally, the pandemic greatly decreased revenue for many business owners. While some were able to access pandemic relief programs that kept them afloat, this wasn’t the case for all of them. Some defaulted on their loans, while others backed out of loans that they initially planned on taking.

What Does The Future of The Industry Look Like?

Slowly but surely, the pandemic is becoming less of an issue, and ideally, more people will begin working again. However, for some businesses, having a hybrid office or a completely remote workforce is becoming the new reality. Currently, loans for office spaces have been less impacted by the pandemic than those for hotels or restaurants. While these leases are typically long-term, they will be expiring soon, and with office expectations changing, this could result in challenges for the industry.

While the commercial real estate loan industry has been impacted by the pandemic, only time will tell if this impact lasts. The commercial real estate loan industry is evolving, and with good reason. For more information on commercial loan programs, contact the experts at West Coast Commercial Capital LLC. We are a multi-faceted lending and investment firm that is eager to help you with your property loans.