While the commercial segment of the midstate real estate market seems to be waiting to see if the pandemic will slow demand for office space, residential housing is seeing recovery despite a shortage in housing stock.
For the hospitality industry, hotels that serve leisure travelers are faring better than those that cater to business clients, including events and meetings.
Those were the sentiments that emerged during a Real Estate and Development Summit convened by Central Penn Business Journal. The event brought together business leaders in the real estate and hospitality industries to discuss the range of impacts the virus had on the local and national economy.
Keynote speaker Keith Aleardi, executive vice president and Chief Investment Officer of Fulton Financial Advisors, gave an overview of the local and national economies. Unemployment rates continue to move back to pre-pandemic levels with 8.1% unemployment in Pennsylvania and 7.9% nationally, compared to 15.1% and 14.7% respectively in April. And he does not expect a second lockdown in the wake of increased positive cases, at least not one as severe.
“We saw the worst back in Easter week, mid-April,” he said. “We have been recovering ever since. The question is do we get another lockdown. I don’t think we will experience the same lockdown.”
Unemployment rates in the state are lower than the Pennsylvania average in industries such as health care, social assistance and transportation and warehousing. But other industries, such as manufacturing and retail, continue to deal with higher unemployment.
Turning to housing and construction, Aleardi predicted demand for new homes will continue to be strong in the coming months, but there will be less demand for new construction projects, and more demand to retrofit older buildings.
Joy Daniels, owner of Harrisburg-based Joy Daniels Real Estate Group, mirrored Aleardi’s comments on housing, adding that the industry is still waiting to see how the epidemic will affect the long term way people choose to live.
“Things like dedicated work spaces are really important now to homeowners,” she said. “We don’t know how long that will last, but real estate agents are flexible and we will adjust.”
Lowell Gates, owner and founder of Camp Hill-based Linlo properties, was more confident about commercial real estate. Media coverage regarding the death of the office market is “somewhat exaggerated.” While commercial real estate did take a hit as companies began operating online during the pandemic, companies will still need office space, particularly following a vaccine.
“I think tenants really do see value in having office space where team members can come together and work,” said Gates. “On the other hand, my biggest concern is with national tenants. They are making the most inquiries to us about their office space whereas local and regional tenants seem very content to come back to work.”
Mark DiSanto, CEO of Triple Crown Corporation in Harrisburg, agreed. His national clients are the ones worried about keeping their physical locations as regional tenants wait out the storm.
Part of Triple Crown’s portfolio includes industrial, which continues to show strong demand for real estate, according to DiSanto.
“We love the industrial market,” he said. “We have smaller industrial flex and we’ve developed larger big box facilities. Demand is strong and continues to be strong.”
The hospitality industry is also coming back, but in a lopsided way as leisure travelers look for more destinations they can drive to and pause air travel for 2020, said Michael Gillespie, Chief Accounting Officer at Hersha Hospitality Trust. The industry also took a hit when business clients stopped holding events and conferences, he said.
Local, independent lodgings could continue to do worse than properties affiliated with stronger brands as guests look toward the safety of a known brand.
“People will travel, hotels will recover, but how long will it take