While we foresee new businesses will mushroom following the paradigm shift brought about by the Covid-19 global pandemic, there will be certain sectors in the economy which will be ruled out of business or readjusted to a new equilibrium. Though the moratorium introduced by the Malaysian government will help bridge some difficult times, I opined that the following businesses will probably not fare as well:
Airbnb Operators and Owners
CEO of Airbnb Brian Chesky, was reported as having said: “It took us 12 years to build Airbnb, and we lost almost everything in four to six weeks”. Tourism activities including local tourists, will definitely decline as cross country borders remain closed for an unknown period. Local tourism is anticipated not to be able to fill the gap.
Landlords With Tenants In Tourism Related Industries
Business for tourism-related services for example ticketing agents, tours and transport companies will remain bleak, with some even facing the risk of foreclosure. Landlords renting units to these companies might face difficulty in terms of rental collection in the short term.
Landlords Relying On Student Accommodation Rentals
As colleges and universities move onto and continue with online learning, students from out-of-town now have the option of learning from their respective hometowns instead of physically renting rooms near their campuses – which has been the previous norm for those seeking tertiary education in capital cities. Apartments and houses situated near campuses which have been converted to student hostels previously will face a decline in occupancy rate.
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Landlords For Co-working Spaces
With the “new discovery” of working from home as the new status quo,
demand for co-working spaces will be reduced significantly, and probably may be only limited to the need of space for group discussions. And even this, can be met and delivered via online video conferencing facilities! Co-working spaces will be faced with lower occupancy rate resulting in the erosion of profits and ultimately, might even pose a threat in paying rental to landlords.
Landlords For Eateries
With the “social distancing” standard operating procedure (SOPs) rule in place, eateries with dine-in option will now have to operate with a lower capacity which directly translates to a lower revenue and profit margin. If this is prolonged, business viability will be at stake hence, putting a danger to the termination of rental contracts.
In view of these impending circumstances post moratorium especially after October 2020, some investors may face difficulties in servicing their mortgage(s). To relieve their financial burden, owners may choose to put up their properties for sale in the secondary market, with some even willing to transact at a lower or below market price.
Hence, before even being trapped in that situation, I highly advice those who are currently facing financial constraints or foresee uncertainties in the near future, to make a trip to your bankers immediately. Explore ways to reduce monthly commitments to a more affordable level by adopting some of the following measures: either increase the tenure of one’s mortgage, refinance high yielding properties or re-evaluate one’s investment portfolio, etc.
The journey ahead may not be easy but it can be achieved. Work out strategies to address challenges, improve on your Information and Communications Technology (ICT) skills and have a Plan B in place. Just like everything else, this too shall pass!