M id A tlantic Real Estate Journal — Spring Preview —April 24 - May 14, 2020 — 15C
C ommercial R eal E state L aw By Neil Andrew Stein, Esquire, Kaplin | Stewart Trying To Predict The Future Real Estate In The New Normal
strikes, lockouts, terrorist threats or actions, and acts of God or act of nature, such as
frequency to decide whether vague or ambiguous document language will constitute a force majeure event. Experienced commercial real estate lawyers will be busy. Lease modifications, debt restructures, and force majeure disputes wi l l be prevalent. Income-producing property, facing a substantial reduction in rental income and fair market values, will lead to real estate tax appeals. Opportunistic investors will need counsel when raising private equity to buy devalued assets. For developers, the
asey Stengel once said, “never make predic- tions, especially about
space to choose from, at very competitive rents Even non-French speaking
land use process is stalled. However, with some munici- palities continuing to process permit applications, and oth- ers embracing virtual meet- ings, the process should ramp up soon. The current problem, at least in Pennsylvania, is that private construction is not permitted. Whatever the level of water in your glass, all we can do is hope for the best. Neil Andrew Stein is a principal of Kaplin | Stew- art and a member of the Land Use, Zoning & Devel - opment Department.
the future.” I will tempo- rarily ignore that wisdom. Nonetheless, the predic- tions that fol- low are pure speculation. The future
The future of commercial real estate, at least for the remainder of 2020, may depend upon whether you consider your glass to be half empty or half full.
hurricanes, floods, and earth - quakes. Generally, asset dimi- nution, financial reverses, or general uncertainty about the future are not force majeure events, though a lender may consider such events inmaking financing decisions. Courts will be called upon with greater
real estate professionals are learning the meaning of “force majeure”, which excuses or permits delay in performance under certain circumstances. Force majeure means “greater force.” Force majeure events are often defined to include political events such as wars,
Neil Andrew Stein
of commercial real estate, at least for the remainder of 2020, may depend upon whether you consider your glass to be half empty or half full. If you are a “glass half emp- ty” person, you will embrace the inevitable conclusion that the economy is already in a recession. As a result, some commercial transactions will get delayed or deferred, while others will not get done at all. As the recession continues, perhaps even worsens, many more landlords and tenants will be compelled to renegoti- ate the terms of their leases, particularly the payment of rent. Even with rent deferrals or reductions, many smaller businesses will not be able to survive. Many small to mid- size retail centers will see higher vacancies, making it difficult for owners to meet their debt obligations. Local government will not escape unscathed. With Pennsylva- nia construction activity in shutdown mode (at least for now), state and local govern- ment will see a dramatic drop in income from permit, inspec- tion and impact fees, transfer taxes, and real estate tax revenue typically generated by new development. State and local government will need to identify more creative mecha- nisms for raising revenue. If your glass is half full, great opportunities are ahead. For those investors looking to buy or refinance, interest rates are at historic lows and will be for the foreseeable future. Infla - tion is not a concern. Pent up demand for housing will help the economy recover at a rap- idly fast pace. If the mortgage market tightens, apartment development will see a new infusion of capital from pri- vate equity. For developers, state and local government, hungry for the income gener- ated by new development, will expedite land use approvals. Existing businesses that do survive will have a plethora of
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