Commercial real estate investors are raising funds to acquire distressed assets, but they face uncertainty about how Covid-19 will affect the retail, office and hospitality sectors, said Doug Greenspan, a managing director at A&G Real Estate Partners, during a recent Turnaround Management Association webinar.

“If you look at office, it does appear that we may see major shifts in how the labor force works,” he said. “One scenario is that many people will go into the office for just a couple of days a week. Even if that’s just 10 or 15 percent of workers, you’re talking about far-reaching effects on the demand for space and, in turn, the value of office assets.”

The webinar, which was sponsored by TMA’s Central Texas chapter, focused on the effects of Covid-19 on real estate. Greenspan, whose firm is providing real estate services and advice to the likes of DSW, Ruth’s Chris, IT’S SUGAR, and Cinépolis, talked at length about retail.

“Underlying issues that were visible in retail pre-Covid really came to a head with the onset of the pandemic,” he told the audience. “Retailers that were on everyone’s watchlist have since filed for bankruptcy. Our own Chapter 11 client list now includes, among others, GNC, Pier 1, Ascena Retail Group, Tailored Brands, Tuesday Morning, Modell’s, Stage Stores and Nieman Marcus.”

Before the pandemic, the growth of Internet shopping and declining foot traffic at malls and stores had already affected sales-per-square-foot productivity, even in historically strong retail markets, Greenspan said. “In the fall of 2019, we were seeing retail rents decline in just about every submarket in New York City.”

The accelerating shift to ecommerce is now spurring some retailers to speed up the implementation of what were formerly medium- or long-term plans to ramp up their ecommerce platforms, Greenspan noted. “Those that are able to do so successfully are already reaping the dividends,” he said. “The trend is so pronounced that it is fueling strong pricing for fulfillment space in the industrial sector.”

As Greenspan’s recent discussions with restructuring attorneys have made clear, various funds are preparing to acquire distressed real estate assets, not only in retail and office but also in hospitality. “As this drags on, they are ready,” he said. “The capital is out there.”

While the post-pandemic picture is still characterized by uncertainty, certain outcomes are clear enough for the short term. “To be sure, retailers are going to be closing thousands of locations,” Greenspan said. “It’s going to be tough. This is not the end. But we will see some winners here—smart operators that optimize their real estate to cut costs, improve performance and position themselves for the new normal to come.”

The New York-based executive, who is co-chair of the TMA’s NextGen Committee (New York City Chapter), was joined on the webinar panel by Joel Waxman, Managing Partner at Paramount Specialty Finance, and Kevin White, Chief Investment Officer of Virtus Real Estate Capital. Greg Milligan, Executive Vice President at Harney Partners, moderated.