Encouraging downstream processing: industrial policy or resource nationalism?

Why is it crucial to consider downstream processing at this time? There has long been a discussion in economic policy circles about downstream processing, most notably in the context of central planning or mercantilism, as evidenced by the former Soviet Union. With the fall of the Soviet Union, the demise of central planning, and the dismal outcomes of industrial policy as it was implemented in both developed and developing nations during the 1970s and 1980s, it would have been simple to assume that this conversation had come to an end. It seemed reasonable to assume that recent history would have provided enough empirical proof to reassure even the most doubtful. Over the last three decades, global trade has expanded at an unprecedented rate, leading to a significant decline in poverty. This can be attributed, at least in part, to specialization and the dispersion of supply chains. Notably, global trade has outpaced global GDP growth, refuting the claims made by proponents of policies

How to Avoid the Commercial Real Estate Post-Covid Transformation

The pandemic slowed global economic growth and affected every industry, including real estate.

The lockdowns that forced businesses to close and the shift to remote labor caused a significant transformation in the commercial real estate (CRE) sector. I believe that, more than two years later, we can objectively evaluate the challenges CRE encountered and determine the ongoing effects of this shift on us.

The Setting Before COVID-19 And The Upheaval That Took Place

The commercial real estate market was booming and expanding steadily before the epidemic. Office space was in high demand, retail spaces were being rented out by the day, and the hospitality sector was flourishing. Developers and investors were often eager to expand and take risks. There were also lots of loans available, often with good terms. The epidemic represented a paradigm change for CRE. Suddenly shopping malls and office buildings were deserted, and many hotels had to cancel. Covid forced the industry to immediately adapt.

Office Spaces

Businesses were compelled to reevaluate their office design as remote work became more prevalent. Companies such as Twitter and Square offered permanent remote work possibilities to its employees. There was an opportunity for subleasing and rent reductions when office building occupancy declined. A few businesses even closed their office buildings or cut back on staff.

Shop closures and the rise of online shopping decreased foot traffic, which caused problems for stores that sell goods. Retail giants JCPenney and Neiman Marcus filed for bankruptcy. Malls and shopping complexes need to reinvent themselves by prioritizing experiences and services over goods. Several of these smaller businesses were losing money by maintaining vacant premises that were unoccupied.

Hospitality hotels were particularly severely struck, with their occupancy rates plunging to record lows. Large hotel chains, like Hilton and Marriott, suffered significant financial losses. For Covid-19 patients and medical personnel, many hotels altered their offerings to incorporate long-term rentals or turned into short-term lodging options. Restaurants were also hit hard. Some restaurants changed to just provide takeaway and gradually returned, but many were forced to close because they could not keep up with their expenses, leaving buildings empty.

Although these disruptions worried businesses greatly, Covid-19 was a significant test of flexibility and ingenuity. Everyone took something away from this because it was unlike anything that had ever happened before. While it was painful to see so many firms collapse, I've also found that a lot of them bounced back stronger and were able to implement new practices. The CRE market, in my opinion, is proving just that. In order to retain returns on their investments, CRE investors had to decide how best to alter course after building occupancy decreased sharply.

The Role Of Loans In The Transition

During this time, loans played a critical role in helping commercial real estate investors weather the storm. This took place in a few ways:

Government Support

The U.S. government introduced programs including the Paycheck Protection Program (PPP) and Economic Injury Disaster Loans (EIDL) to aid businesses, particularly those in the CRE sector. These loans were a lifeline for struggling property owners, allowing them to maintain workers and cover operating expenses.

Lateness in Debt

Lenders helped by enabling borrowers to temporarily defer loan payments in recognition of the grave conditions, as many foreclosures and evictions were avoided. The CARES Act and loan forbearance let many tenants to continue operating their businesses and make payments, which helped CRE properties stay alive.

Possibilities to Refinance

Many investors and property owners in 2020 were able to refinance their properties at a much lower cost than they had previously because of the historically low interest rates.

SBA Line of Credit

The Small Business Administration (SBA) was quite generous in providing money, enabling many new or tiny firms to grow despite the challenges they encountered. The 7(a) and 504 programs provided these small businesses with government-backed capital and flexible payback terms, both of which were great options.

Resolutions for CRE by 2023

Even after two years, the CRE environment continues to demonstrate the remarkable adaptability of the sector to shifting trends and difficulties. One of the main drivers is the large selection of loans that are offered, each one created especially to meet certain needs and market opportunities.

Traditional Loans

The primary source of finance for CRE is conventional mortgages. Real estate purchases and refinancings are made possible by these dependable and consistent fixed-rate or adjustable-rate loans.

SBA Line of Credit

Even today, small businesses looking to expand or acquire additional commercial real estate can benefit greatly from SBA loans. There is a lower required down payment and more accommodating terms on these government-backed loans.

Construction Loans

Construction loans are a great way to pay for the acquisition of property, building fees, and other development expenses. These loans can help with cost control and project tracking because many of them are funded at different times.

Bridge Loans

When longer-term funding is agreed, bridge loans are widely utilized to purchase or renovate real estate. They also serve as a temporary financial bridge. Because they are flexible, they are vital in marketplaces that are competitive and require quick judgments.


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