Optimistic Realism


By Ian Slater | April 14th, 2020
My days at the moment are, beyond the transactional activity we are working on (which in actuality, we are seeing offers and transactions happen!), a string of conversations largely surrounding the same subject: when do you feel the lockdown will end, how will it end, and what will the world look like -- real estate wise -- on the tail end?
Short answer: I, you, anyone, have really no genuine certainty how the world will look on the tail end. 
We are seeing the first “plans” for reopening arise. States are forming coalitions to unite and make plans together, skirting the federal government. Joe Biden has released a plan in the form of a NYTimes op-ed. Israel has released a plan that shows a multi-phase reopen of the economy in two-week stints. France has said that the lockdown will begin to ease on May 11th. 
And then there is the wide-ranging chorus of what the economy will look like: everything from “long term depression” to “the strongest Q3 we have seen in ages” has been floated, all with convincing arguments. 
One of my partners on the team yesterday used the term “optimistic realism” to describe how he was feeling towards the reopening of the market. I think that this is the best term I have heard yet and one we should all think through. 
Optimistic because of a few things: 
  • Countries actually are coming forth with plans that seem to be sensible
  • The stock market seems to be grasping the crisis and performing accordingly
  • In my world, real estate buyers are coming out of the woodwork saying they’re interested in taking a look at the market again (likely seeking great deals)
  • Governments have taken a “do whatever it takes” attitude to save economies and try their best to keep businesses afloat
  • There is significant talk and writing surrounding medical advancements
  • Numbers in the hardest-hit areas, and the one most important to me (NYC) seem to have begun to level

Realistic because:
  • There is no ignoring the economic impact this will have for a long time on many industries
  • Unemployment very likely will spike and stay that way for some time as businesses must try to regain their footing
  • Urban real estate environments quite possibly will become less desirable for a time (but keep in mind, it only took several years after 9/11 for buyers to begin buying $100M penthouse floor apartments!)
  • There will likely continue to be flare-ups before we return to any sense of normalcy around a vaccine

So we must temper our expectations for the real estate market: is it likely to go into the gutter and be a blood-in-the-streets environment? No. It likely will begin to transact again and enjoy an uphill recovery towards the later quarters of the year. And pent-up demand, government stimuli, and lack of supply may cause a quick boom. But, we must remain realistic: there are certainly those who will leave the city, transactional activity will be down for a period, and the economic effects will be seen by buyers, sellers, brokers and developers on the ground. 
But we do have the news to be hopeful, to be optimistic even, for the later months of the year.

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