1 June 6 Ways COVID-19 has changed commercial real estate
There is no doubt that the COVID-19 pandemic has suddenly thrown the world into an unfamiliar state of inactivity. Businesses are gradually drifting from physical spaces to virtual interactions. Industries like the Commercial Real Estate (CRE) have been met with the need to effect specific measures that aid the transitioning into a new normal. In a bid to ease the fear and cope with these unforeseen circumstances, we will look at six ways CRE companies have changed or restrategized.
#1: Increased Demand
Commercial Real Estate (CRE) sure is different from most of the other sectors affected by the coronavirus pandemic. Since most people are now at home because of the lockdown restrictions imposed, there is an increased demand for more storage and refrigerating facilities. This is as a result of increased demand for home deliveries of groceries. That’s not all. Self-storage facilities have become the new cool for all of the rental cars no one is using. Pretty cool stuff, huh?
#2: Going Virtual?
The world is rapidly shifting. Major industries in the economy are panning towards virtual and remote work, which is also possible for commercial real estate. The use of virtual and augmented reality for open houses and showings is not entirely novel. It might just be the best development for the commercial real estate industry.
#3: Lease Concessions
While the pandemic has been viewed from a reductionist perspective, responses to policies prohibiting certain tenants’ activities are not the same in all locations. Behavioral data gives good insight as to how people respond on different occasions. This helps when making salient decisions that affect situations unique to each individual. Informed decision making is essential, especially when tenants seek lease abatement. Protocols are observed to ensure fair treatment to all tenants and assist communicators in relaying information to key investors and stakeholders.
The fact is, most sectors of the economy (with an exception to essential services, of course) have been affected by the pandemic. The rate of investments in these sectors has reached an all-time low, and commercial real estate is no exception. To manage future problems, CRE companies are actively investing in technologies that enhance customer experiences. These technologies range from app developments to using online workspaces for team collaborations.
Regardless of disappointing market trends and liquidity rates, commercial real estate loan specialists remain in a ‘price discovery’ phase and are shifting their focus to keeping current portfolios intact. Fix & flip loans are currently off the table, but just for the short-term. More priority is presently given to formulating strategies on the best ways to oversee forbearance requests.
#6: No More Bullpens?
Most firms have favored a collective workspace in the past. This has been in a bid to foster relationships, and increase teamwork. However, in light of recent happenings, research shows that as the situation begins to return to normal, private offices would be the new cool. Experts also predict an increased emphasis on air filters, sanitation, and security.
The situation for the commercial real estate sector is not the best. Still, it is hoped that negative impacts would be short-term effects only. Goldberg has predicted that although the global pandemic might cause a short-term slump, it will have limited effects in the long run. We hope that this is the case.