Bankruptcy in 2020: Which Industries were Hit the Hardest?
With the end of the COVID-19 pandemic on the horizon, there have been many changes in many different facets of our daily lives. From adding “social distancing” to our vocabulary to global shutdowns and transitioning to working from home, 2020 was undoubtedly an unprecedented year. A year later, this begs the question, which industries were affected most by the COVID-19 pandemic?
SAM sent out a poll on LinkedIn to get after that very question. Which industry was hit hardest by the pandemic in 2020 and saw the most companies file for bankruptcy?
Over the course of a week, SAM’s connections weighed in with their opinions. An overwhelming majority of voters split their votes for those that fared the worst during the pandemic between the Entertainment and Retail industries. Real Estate gained 8% of the votes, and Oil & Gas only received 2% of the votes.
Shockingly, the Real Estate industry was hit hardest by the COVID-19 pandemic. According to New Generation Research’s article in the Washington Post, 985 Real Estate companies filed for bankruptcy in 2020. As the world shifted to a work from home culture, the value of retail and office spaces plummeted. The value of real estate development projects plunged into the red, meaning the value of properties became lower than the owed amount. Real estate companies with heavy debts will be among the most at risk, and with working from home becoming more normalized, a return to “normal life” might not be enough to help these companies climb out of debt.
However, the necessary shift to working from home is only the tip of the iceberg for why the Real Estate industry struggled during the pandemic. Bankruptcies filed by entertainment companies nearly quadrupled in 2020, while retail filings were up by over 50% from the previous year. Restaurants also had a challenging year with 660 owners filing for bankruptcy, over a 50% increase from 2019. There is no denying the effect restaurants and retail stores closing their doors had on the Real Estate industry. For example, the pandemic-driven explosion in online sales has hastened the closure of brick-and-mortar locations for many major retailers.
When the shutdowns began in March, we heard the fears of bar, restaurant, and shop owners. We witnessed the transition to becoming more aware of shopping local and ordering takeout from our favorite neighborhood restaurants. As a society, we made great efforts to help many small businesses keep their doors open. Music stars from all over the world streamed benefit concerts from their homes to help support other members of the entertainment industry. The extent to which we came together to support our communities is simply undeniable.
Unfortunately, not every industry was able to be supported by consumer awareness. Industries that primarily operate business-to-business (B2B), such as Real Estate and Oil & Gas, which had the second most bankruptcy filings in 2020, faced a greater degree of adversity. B2B industries were not able to be supported by the consumer community in the same manner and, as a result, felt the residual shocks of the shutdowns and travel restrictions.
As we near the end of the pandemic and return to normalcy, many industries will be left facing distressed assets from the COVID-19 pandemic. Many businesses will need to salvage capital from their distressed assets in order to recover and invest in their futures.
It’s at the heart of SAM’s mission to help our clients recoup financial losses via distressed asset sales. If your business needs help recovering from the pandemic and you are unsure how to approach your business’s distressed assets, know that you will always have a friend in SAM. Our team at SAM will offer you professional guidance that will help you to maximize the value of your asset sale.