Chevaillier asks the critical question for investors: "Should you make the bet now that situations are about to stabilize?"
"The biggest unanswered question with the CARES Act and the $600 additional dollars per week in unemployment is if it will be extended," Flanigan says.

SEATTLE—It's a peculiar economic time. COVID-19 seemed to be receding, then it started to flare back, continuing to put a damper on the overall economy while commercial real estate investors pace with capital to disperse. According to Seattle-based Candice Chevaillier, principal of Lee & Associates Northwest's multifamily team, and Don Flanigan, a SVP at Lee, the industry wants to roar back.

"We didn't break this," says Flanigan. "The system was in place and functioning very well, everything considered. There's a tremendous amount of dry capital on the sidelines waiting for opportunistic deals."

This is especially true in multifamily, which is Flanigan and Chevaillier's bailiwick. "There's a bid/ask gap right now," says Chevaillier. "Sellers don't want to recognize that anything has changed, and buyers want those opportunistic deals. So it's a waiting game."

Ironically, the real estate market is ripe to return. "With the 10-year Treasury trading as low as it is," says Flanigan, "the debt market will continue to be under pressure to put money out and spreads will continue to tighten, creating an even more appealing lending market."

So everyone is chomping at their investment bits to get back to work. Even multifamily, which both Chevaillier and Flanigan characterize as the industry's investment darling, took a major hit these past five months.

"There are a lot of projects in the pipeline," says Chevaillier, "and depending on what stages they were in, we saw things slow down for everyone–buyer and seller–as they adjusted to the market. We saw some price modification to the tune of 10 percent because of COVID." She even reports seeing some deals built on the guarantee of future rental income as part of an escrow. "Early on, that's how buyers and sellers would adjust to the economic circumstances, and then everything went upside down."

The team reports frankly that, much like all other commercial real estate firms, their numbers also took a hit. With multifamily sales down in the Tri-County Seattle area, activity slumped to 77 percent in the first half of the year compared to the same time in 2019. "This time last year we were at $2.7 billion," says Chevaillier. "We're at about $600 million now."

Year over year, the sales per square foot are telling. Chevaillier reports a strong fourth quarter run-up in sales pricing, but 2019 overall was a bell-ringer. Looking at prices per square foot, "The first six months of 2019 were at about $363," she says. "This year, it's $334."

This pretty closely replicates the national crisis. "When markets started to lockdown," she says, "commercial brokers were unable to practice, so we saw a freezing of normal activity."

The Lee team points to the hit that the REIT market took as evidence of COVID's toll. A recent Lee research paper reveals that "the early weeks of the stay-at-home orders and business shutdowns were accompanied by steep declines of share prices across all REIT sectors. The FTSE All Equity REITs index had a total return of negative 7.0% in February, slightly less than the minus 8.2% total return on both the Russell 1000 and the S&P 500."

But, interestingly, the bad news for activity overall could have a potential upshot in a traditional underdog location–the suburbs, and Flanigan reports increasing inquiries about "suburban land where developers can build garden-style and larger unit sizes." With so much yet to be resolved in terms of the pandemic, he hesitates to interpret the depth of meaning in these inquiries. "It's frankly too early to tell now if this is an actual trend or simply reactionary."

It's premature as well to discern the impact of unemployment on housing's health. A lot of that, he says, will depend on what happens with the stimulus born of the CARES Act.

"The biggest unanswered question with the CARES Act and the $600 additional dollars per week in unemployment is if it will be extended," Flanigan says. "It's scheduled to burn off at the end of July. What will the impact be for the folks who are unemployed and have been relying on the additional $600 pre-tax per week? What will collections be like come August and, more important, come September if that program isn't extended?"

So, when will the waiting game end? Questions such as the stimulus extension make predictions fuzzy indeed. Chevaillier asks the critical question for investors: "If you look at brick and mortar real estate with its longer hold time, should you make the bet now that situations are about to stabilize?"

Still, there's all that dry powder, which carries with it the promise of a resilient market. "We're prepared for volumes in 2020 to be down," says Flanigan. "No one had COVID in our business plans, and we had to make adjustments. But depending on how the end of the year plays out, at some point the dam will break."