Opinion: COVID-19 will impact Detroit property owners, tenants, investors
Devastating news continues to flow regarding COVID-19: Rising numbers of Michigan residents testing positive for coronavirus, Gov. Gretchen Whitmer’s “stay home, stay safe” executive order for non-essential workers, and much more. We are all in an unprecedented time as we battle this deadly virus, with people waiting for the momentum to begin to slow down.
Detroit is the leading city in Michigan for reported COVID-19 cases, and U.S. Surgeon General Jerome Adams says this trend will continue, in large part due to Detroit being a densely populated city. More lives are affected daily, and economic impacts on Michigan businesses continue.
In the world of real estate and investment, commercial and residential, Detroit had experienced an unprecedented growth period prior to COVID-19’s arrival. The question now is: What will real estate look like in Detroit once this virus passes and “normal” life resumes?
As a business owner in real estate, construction and property management, I see daily how the stakeholders in Detroit and abroad are affected by COVID-19. Here are some things property owners and tenants can expect, both short-term and down the road.
● Wayne County won’t foreclose on any homes in 2020 due to tax delinquency. Prior to the announcement, about 3,200 occupied homes were expected to be placed in the Wayne County Tax Foreclosure Auction, and this reprieve gives those homeowners time to catch up on their payments.
● There is also an immediate moratorium on evictions in Detroit, and how long this lasts will be of interest both to tenants looking for relief, and to landlords who must strategically adjust financial expectations while remaining sensitive to harsh new realities their tenants are facing due to COVID-19.
● The impact of the $2 trillion stimulus bill, and money coming soon to recipients' bank accounts, will play a key role in how the real estate market develops. This money will help many tenants make rent despite a job loss. Property and business owners may also benefit from the portion of the bill aimed at small business.
● With stock markets unstable, investors may consider pulling money out of traditional stock market investments, and opt to invest in property to diversify their investment portfolio to minimize further market fluctuation.
● The potential for the virus to make major waves in the real estate market and economy in Detroit could be huge, particularly for tenants. Detroit is a majority rental city, and the effects of COVID-19 are not making it any easier to navigate the market.
With the uncertainty behind the COVID-19 crisis, some landlords will opt to sell their assets, but cash-strong investors will immediately absorb the supply. Being that Detroit is a competitive market for investors, any additional supply could present increased investment opportunities at slightly lower prices. If the rental rates decrease accordingly, the returns may remain constant if the break-even point is linear.
Long-term health of Detroit’s economy and real estate market depends on how long the state is on lockdown and the economy is at a near standstill, and how fast people and businesses can rebound from this unexpected crisis and utilize the assistance given to them by the $2 trillion stimulus package.
Connaé Pisani is founder and CEO of National Real Estate Management Group, a real estate investment, construction and property management firm that manages properties throughout the city of Detroit and beyond. She can be reached at firstname.lastname@example.org.