The COVID-19 outbreak is the perfect example of the Black Swan.
The black swan theory or theory of black swan events is a metaphor that describes an event that comes as a surprise, has a major effect, and is often inappropriately rationalized after the fact with the benefit of hindsight.
COVID-19 has sent the world into a tailspin.
The stock markets are falling, international travel has been shut down and hysteria has reached the level of the hoarding of toilet paper. While real estate has been largely unaffected as of yet, it is best to prepare for a very interesting 3-6 months ahead. By every expectation, this will be a short term event with long term recovery for many business sectors.
The world will recover, but it will probably look a bit different when it does. Constraints focus the mind and provide fertile ground for creativity. Many of the most iconic companies were forged and shaped during difficult times. Google and PayPal grew through the aftermath of the dot-com bust. More recently, Airbnb, Square, and Stripe were founded in the midst of the Global Financial Crisis. Tough times make us shift and focus on the effective and efficient.
Luxury will take it’s hits with the COVID-19 Pandemic.
There have been billions of equity lost in the global financial markets. Cash has been pulled out and is waiting on the sidelines. There are more than a few second and third tier countries that will be devastated by the economic burden of COVID-19 which will have an effect on global currencies. The upside is real estate is safer than cash at the moment. I also think there will also be an upswing in interest by the HNWI and UHNWI’s in luxury vacation markets in non-urban areas for future contingency against pandemics.
Here are few suggestions.
All of this is unfolding hourly at this point. But these are a few things for you to put into action now.
• Cash flow is king. Lack of cash flow kills businesses. Save cash and make sure you can get through the roller coaster. Defer payments and increase your credit lines.
• Think virtual. There is an opportunity to market and operate differently. Do virtual showings via video on your listings. Invest in Zoom or something similar for your team meetings and save the commutes. Connect with clients through social media, phone or video conferencing. As more and more schools and businesses close, there will be a great opportunity to connect with those typically harder to get a hold of.
• Prepare to work hard to keep deals together. Be forewarned that it will take some effort to combat the hysteria and sales might just fall apart. Deals that seemed certain may not close. The key is to not be caught flat-footed and be proactive.
• Cut advertising and marketing expenses. Take a hard look at your marketing spend. If there are channels that aren’t bringing a ROI, cut them back. Now is the time to look at investing in highly targeted social media spends.
• Be prudent with capital spending. Re-evaluate your spending on long term investments or assets. Really examine whether your capital spending plans are sensible in a more uncertain environment. For example, I’d be pushing forward with business expansion spends but holding back on buying that new car.
Many of your clients are going to get bit by this Black Swan. This is going to affect people and industries that are heavily focused on those over 55 and with compromised immune systems. For those the recovery is going to be longer term. But like every other Black Swan, it brings new opportunities and revenue to other segments of the market.
Bottom line on the COVID-19 affect on your business.
Be aware and be prudent. But don’t be afraid. This Black Swan is working in real estate’s favor.
Do you have an opinion or insight to share on how things are being affected in your market? Please contact us, we’d love to discuss it with you.
