The Commercial Real Estate Dilemma

The commercial real estate market continues to suffer from all sides. Although businesses are opening, it will take a while for many of them to get back on their feet. People are hesitant to invest in commercial properties now, partly because of the expectation of a possible second wave of the coronavirus pandemic and partly because of looting and destruction of property. Expensive prices also make business owners a little reluctant to commit to a lease or purchase, as well as the possibility that they or their employees may get the virus. This has left many companies attempting to renegotiate their lease or even trying to get out of it.

Another problem facing commercial real estate today is the rise of selling online. Giants such as Amazon and eBay, combined with the lockdown, has caused online ordering to skyrocket – all but eliminating the need for large commercial real estate stores. This lack of need has given rise to the collapse of many large stores once commonly seen at malls. Some companies have also discovered that many of their employees can successfully work-from-home, eliminating the need for large office spaces.

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Job Postings Down

The popular job listing company Indeed reports that job listings are down from this same time last year. Although job sectors varied in the number of listings, overall listings had dropped by 34%. The most significant drop in listings was for the hospitality and tourism industries, which were 63% lower. Since the start of May, the number of listings has slightly increased, but the number of new listings is still very low compared to a year ago.

Economic Recession

Many have long felt that we may be in a recession because of coronavirus, but now the National Bureau of Economic Research (NBER) has verified it. After having enjoyed economic growth for the past 128-months – starting in June 2009, the agency says we are now in an official recession. This is based on the severe job loss of 42 million people and the fact that businesses across the nation had closed. An additional factor is the lack of personal consumption of goods and also the fact that there was negative growth in U.S. production levels for two quarters.

Dunkin’ Donuts to Hire 25,000

The well-known breakfast spot for coffee and donuts had closed many of its stores in the U.S. and abroad because of the coronavirus pandemic. The lockdowns meant people were staying home and not going out for their morning joe. Now that the U.S. and other countries are largely open for business, this favorite stop has decided to reopen its remaining stores. This means that it needs to hire 25,000 new employees and some managers.

BP to Lay Off 10,000

BP has announced that it is going to release as many as 10,000 employees. The reduction in oil demand and usage around the world has led the company to downsize. It is already aiming to reduce its expenditures by 25% because of a lower demand for oil. In March, they decided to put a freeze on reducing jobs. This freeze enabled many employees to financially weather the storm, but the demand for oil is still way down.

After the reduction in employees, the company will be left with around 60,000 people globally working for the company. Most of the 10,000 will be among office workers and they are expected to be released this year. About 20% of those laid off will be in Britain. BP stock closed at $28.38 – up 2.38%.

 

About Mike Valles

One comment

  1. Edouard d'Orange

    Here comes the second wave and the related business closures. The stock market is reflecting this based on today’s drop (11 Jun).

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