While we are still in the midst of what has proven to be a challenging year, we want to take time to reflect on what we’ve seen so far and provide our predictions of what might happen in the future. With potential changes to almost every asset class as a result of the pandemic, how can the commercial real estate industry continue to move forward?
In the short-term, here are just a few changes that we have observed:
Crushing, quick loss of restaurants resulting in vacant space
Retail closures due to inability to pay rent
Temporary office closures that proved the ability for many companies to have a substantial work-from-home employee base
Companies re-assessing space needs going forward as more social distance means less density
Fast preparation to address health and safety concerns for return to work—everything from taking employee temperatures to closing common areas to assessing HVAC circulation
Innovation occurring rapidly as products are developed to enhance human and building safety
In all of the change there have been winners and losers. In the short-term, we’ve seen:
[WIN] Industrial spaces house many essential services; space has remained healthy and in some cases has improved.
[LOSS] Most office space has been vacated as employees returned home to social distance. Companies are trying to figure out what this means going forward while some also try to re-negotiate lease terms.
[MIXED] Retail space is a bit of a mixed bag with grocers and other critical services such as home improvement coming out as winners while others such as clothing retailers and toy stores have suffered.
In a transitional time like this, here are some high-priority areas of focus to get you through.
Leverage strategic real estate expertise
During a time of crisis, it’s critical to have the right experts in your corner. Continue to build relationships with the brokers and consultants around you to assess your current portfolio and talk through options; this is important whether you are a tenant or a landlord. By example, real estate owners should be looking at tax valuations, talking to lenders and assessing opportunities for short-term leases for companies that are thriving during this time.
Lease negotiations and special services
Rather than focusing on new projects, companies may need assistance during this time to renegotiate lease terms. Even landlords need to be thinking about how they retain and attract tenants as the world is changing. MarketWatch suggests, “[Landlords] will likely have to think of more creative ways to use their space in order to attract tenants back.”
A focus on workplace experience
Retaining top talent will continue to be a challenge, even as the unemployment rates continue to shift throughout the year. As companies have quickly pivoted to offer remote and telecommute work options, we’ve also seen the co-working industry grind to a halt during this time. (Hopefully along with a vaccine, this sector will rebound.) What does this mean for a company’s space needs and how do they work through options to keep employees engaged and happy? How will the need for more personal space within offices conflict with businesses that are looking to downsize space? A changed mindset is needed not only for how we will physically address space plans to remain healthy but also to address how we continue to create optimal employee experience whether virtual or in-person as we move forward in a post-COVID era.
In the midst of crisis, such as this global pandemic, it’s easy to lean into fear. Use this time as an opportunity to assess and evaluate. Move forward once you understand what is necessary to keep you on track with your goals. Proceed with caution but only after this analysis is complete.