Top Four COVID-Inspired CapEx Challenges and Solutions

SAN FRANCISCO—Between all-time low hotel occupancy rates, fizzled retail rent payments, and an increase in office rent abatements and lease extensions, one thing has become evident across the commercial real estate landscape: capital expenditure spending is frozen, says Harris Cohn, vice president of commercial real estate with Carbon Lighthouse. Public first quarter 2020 REIT investor reports reveal approximately $600 million of previously announced capex spending in 2020 will be deferred.

For example, one office REIT ranked in the top 10 in terms of market value announced in fourth quarter 2019 it would spend approximately $500 million on development and repositioning to earn a 5 to 7% yield. At the end of first quarter 2020, the REIT announced it would put $73 million in “discretionary capex” previously planned for the rest of 2020 on hold.