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A Candid Reflection of COVID-19’s Impact on Commercial Real Estate

Kent White  /   May 7, 2020

 


By: Kent White, Principal Broker | Partner

Over the past 25 years, I have grown accustomed to having a schedule. I wake up at 4:45 am, go to the gym, have breakfast with the kids, and then leave for the office. It’s a routine that I enjoy and appreciate now more than ever. Currently, the gym is closed, the kids are sleeping late into the morning, and breakfast turns into lunch. Working from home has certainly been an adjustment for me and many others.

The interruption to scheduling aside, the commercial real estate industry is built on relationships and communication. It is much more challenging to cultivate those over video conference calls and virtual property tours. The inability to walk across the hall for a quick conversation with another broker on my team, or meet someone for lunch to catch up limits creative thought. The drastic change in our work environments, coupled with economic uncertainty, the mental toll of isolation, and childcare challenges, have made it very difficult to maintain a “business as usual” approach for any industry.

Over the past month, I have talked to many clients, friends, brokers, bankers, etc. and they all ask the same question. “What do you think will happen with the commercial real estate market?” A quick google search will give you many articles written by industry experts predicting a range of answers. The honest answer however is that no one has a crystal ball and we don’t know what will happen.  We are still too early in the pandemic to see how the market will be impacted long term. One thing we all can agree upon is that our country and the world was not ready for COVID-19. Even after the current virus is “defeated,” we all must be better prepared for the next pandemic.  This preparation will include changes to the way we do business and think about commercial real estate.

In my view, post-pandemic, the commercial real estate market, will be defined by market segments more than ever before. The industrial, office, and retail markets will all be impacted differently by COVID-19. These impacts will have a trickledown effect on how each segment is viewed by investors, users, and lenders alike. Will office demand return to pre-COIVID-19 levels now that offices are working remotely, or will companies prefer to work from home? Will we see a shift back to private offices instead of open space to give each employee more than six feet of space?  Will we see an increase in demand for industrial space because of supply chain shortages and changes to just in time inventory management? Will more companies want to bring home manufacturing from other countries who are ill-prepared for the next pandemic? Will retail customers who traditionally shop in stores but have been forced to shop on-line, return to those stores? How will the restaurant industry change?

There are so many unknowns right now, and no perfect one-size-fits-all answer to these questions. Over the coming months, as businesses slowly re-open and learn to adapt to a new normal, we should have a better understanding of the impact on each segment.

One thing that I do know is this country will survive and become stronger. This crisis is not the first, nor will it be the last, our country will face. I’m so impressed by the uplifting stories in our community over the last six weeks. I have watched my wife rise to the challenge of teaching first grade remotely.  I have marveled at local cafes as they orchestrate providing thousands of donated meals to hospital employees and front line workers. And I am proud of my team, who continue to think outside the box and effectively communicate with clients and each other to get deals done.



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