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BACK TO BUSINESS: COVID-19's impact on commercial real estate

COVID-19 has disrupted the commercial real estate industry. The good news is business owners are still choosing East Texas over other parts of the country.

TYLER, Texas — In East Texas, the residential real estate market has returned to pre-COVID-19 levels. For commercial real estate, the journey back to normality has taken a few twists and turns.

Mark Whatley, President and CEO of Burns Commercial Properties, says during the first few months of the pandemic, the focus was on helping tenants navigate the sudden change to their bottom line, and their ability to pay rent as a result.

Whatley says his team spent the first two to three months of the COVID outbreak, working with tenants on rent abatement rent deferrals. He added that after those first few months, his team has "been as busy as we've ever been, not necessarily translating into completed leases and sales at this point, but there are people out there looking."

According to the International Business Brokers Association, brokers representing businesses valued under $2 million reported that 36% of their deals have been delayed in the second quarter of this year, while 16% have been canceled. For businesses valued between $2 million and $50 million, 37% of their deals have been delayed, and 10% have been canceled.

Those challenges are impacting commercial real estate in East Texas as well. "It's taking longer to get people to respond and it's taking longer for deals to come together. Even once you get a deal put together it's taking longer to close," Whatley said. The slowdown can be attributed to a combination of things, including lenders being out of the office due to COVID-19 and lenders working on Paycheck Protection Program loans.

The expectation is that commercial real estate will increase for the rest of the year, as a result of it being an election year and the uncertainty that comes along with that. The good news is business owners are still choosing East Texas over other parts of the country.

For the leasing side of commercial real estate, it is about changing expectations in a world that has completely changed. Moving forward, building owners want to make sure they're covered against unexpected disasters like COVID-19, by including provisions in their lease agreements. "Nobody wants to get caught by surprise again," Watley said. It's a surprise business owners hope to never experience again, as they work to get back to business.

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