Transwestern CEO Larry Heard On Safe Harbor Assets During The Coronavirus Crisis

Downturns are an inevitable part of the commercial real estate business.

Transwestern CEO Larry Heard knows a thing or two about downturns, because he has weathered several of them over the duration of his career. But Heard has never encountered anything as disruptive as the coronavirus pandemic, which has affected individuals, schools, businesses and governments around the world.

One of the biggest lessons he learned from past downturns is that asset classes already performing well heading into a crisis are usually the ones that rebound the quickest. 

“I would say, safer harbor assets would be more in industrial, logistics, multifamily and healthcare,” Heard said during a Bisnow webinar on April 14.

In contrast, the office market is expected to lag those asset types, as it was already experiencing issues prior to the pandemic.

“Retail will have some struggles and issues, and obviously hospitality will probably be the toughest coming out of it because it's tip of the spear, and experiencing some really tough times right now.” 

Industrial warehouses and logistics infrastructure have remained healthy this year, buoyed by retailers shifting to embrace online sales over typical brick-and-mortar stores. In light of enforced social distancing and shuttered storefronts across the country, the need for industrial warehouse space is as strong as ever.

“The Amazon effect is not going away,” Heard said. “You could argue that this component that we’re going through right now, this virus, is going to accelerate that, not decelerate it.”

Heard noted that healthcare is another “wind at your back” type of asset class.

Hospital systems are taking a hit because profitable elective procedures have been suspended, as resources are redirected toward dealing with the pandemic. But once those procedures resume, Heard is optimistic that the sector will continue to perform.

“Healthcare real estate is going to be one of those real estate components, just like multifamily and just like logistics, that I would say, coming out, will be good.”

Healthcare has certain elements in its favor, such as aging demographics, which give it extra pull as an attractive long-term investment.

“Suburban healthcare may emerge as something even more prominent than it did in advance of this,” Heard said.

From an investment standpoint, Heard said he expects the commercial real estate sector to emerge from the pandemic in “great shape,” owing to cheap debt and strong returns. That is unlikely to change in the mid-term or long-term.

“I think we'll be viewed as a very favorable sector, from an investment standpoint, coming out of it,” Heard said.