Real estate billionaire Sam Zell (pictured), said coronavirus pandemic will have as big an impact on the economy as the Great Depression 80 years ago. He added that business models and the way people live will undergo drastic changes in the months following a return to life post-lockdown.
“Too many people are anticipating a kind of V-like recovery,” Zell, 79, said in an interview with Bloomberg Television. “We’re all going to be permanently scarred by having lived through this.” Zell is not the only one who anticipates such an outcome, this week HSBC’s head of global foreign exchange strategy David Bloom stressing the need to “prepare for all eventualities” and outlining the bank’s game plan in the event of L-, U- and V-shaped recoveries.
Zell said in a similar way the Great Depression left behind a generation scarred by mass unemployment, hunger and desperation, the current health emergency will leave its mark.
“How soon will anybody get on an airplane? How soon will anybody stay in a hotel? How soon will anybody go to a mall?” he asked. “The fact that these places may be open doesn’t necessarily mean that they’ll be doing business.”
As health experts talk about the continuous need for social distancing with remote work becoming the norm, whole sectors such as retail, hospitality, travel, live entertainment and professional sports will not go back to the ways things were before the outbreak for years to come.
Zell joins fellow billionaire investor Warren Buffett in agreeing there is nothing to buy since the onset of the pandemic. Part of the problem, he said, is that sellers have unrealistic expectations.
“Those sellers that wanted to sell still remember the prices that were available seven or eight weeks ago. The buyers are looking at a very different world and expecting to see significant discounts,” he said. “When you’ve got that big a spread, nothing happens.”
Zell built his fortune on acquiring real estate ranging from mobile-home parks in the US to shopping centers in Latin America. Shares of his real estate investment trust, one of the biggest apartment owners in America, are down almost 30% since late February. Rents, however, are holding up well enough that Zell said he doesn’t expect any significant changes in monthly collections.