The Pandemic- How Real Estate + Oil will Fare Post Corona Virus
So, the longer the pandemic goes on, the more likely it is that our habits are going to be undone/ change.
Much of what we do is because it is habitual, and that’s just what we were taught, the way that things are done.
We might have had the ability to telecommute for years, but you want to do business with someone, you sit down with them in person. During the pandemic, via necessity, business is done being conducted via Video call.
The longer that the shut down lasts, the more this habit will go by the wayside as it will become acceptable to conduct meetings over teleconference.
This change will have reverberating affects on many different facets of life, the economy, including the demand for certain products.
God Creates New Land
They say that God doesn’t create new land,This statement is in fact False, and I will prove it to you at least for the purposes of my argument here.
As it becomes acceptable to telecommute, to have virtual meeting, the size of offices will shrink, board rooms will reduced in size, the number of offices needed to carry on business in the office will be lessened.
One of the places when I lived in to Los Angeles that I often went to was Century City. Going in there, sitting down for a meeting, signing some paperwork, having to get my car parking validation, was a rigmarole I never looked forward to. Some business needs to be done in person, but in the future if I can do so virtually, I would love to save the time and expense.
Similarly, an employee of the company, might be able to serve you equally well at home and be willing to take less in salary as he’ll use less gas to get to work, and save himself a ton of time, and expense.
Companies would love to save that money, and be able to keep on the employee, it’s cheaper for everyone if he just stays at home. He’s willing to except less pay as it’s less time, less gas, less risk, for him to work in a professional manner from home, the company saves on office space, as well as salary. Savings all around.
Similarly, pay for the employees who are willing to come in for the in person meetings would likely rise.
This will reduce the demand for commercial real estate which can then be repurposed as green space, as residential housing, cropland, whatever the area might be best suited for. Similarly parking structures would be repurposed, traffic congestion would be lessened, as would pollution, the number of accidents, etc.
Oil Demand Reduced
Predictably, if this comes to pass, the demand for oil will drop as people telecommute more and more.
Now conjunction with electric vehicles coming into vogue, and possibly a reduced demand for air travel for the reasons above combined with tighter border controls for the forseeable future, and the price of oil will likely have a lower top on it.
Of course, this will have a destabilizing affect on the countries whose budgets are almost entirely funded by petroleum, which will cause a lot of unrest in the world.
It’s not clear to me how the autocratic regimes of Iran and Venezuela will hang on, except by brute military force against their own people. They certainly will no longer be able to bribe their compliance.
Residential Real Estate
Driverless cars, which will make getting into work faster, and more efficient, possibly even offering the passenger sleep on a bed as the car drives itself to need a location, will change the equation of having prime space in the city. In conjunction with land coming onto the market that was formally used for commercial purposes, the supply of residential land Will increase, pushing down prices.
Additionally, as the need to be in the center of the city drops, residential real estate prices will go down, at least in city centers.
This exit out of the cities might very well be driven by fear of the future pandemic and being in too tight a space.
So, don’t expect to make any money buying a Manhattan condo for the foreseeable future.