A comprehensive look at what’s trending in the world of commercial real estate
Without a doubt the pandemic has upendedcommercialrealestate. Whatwere once solid tenants and asset classeshave been thrown into doubt as social distancing has forced people to remain athome. In response, new practices—such as apermanent shift to remote work—once seenas unlikely are now being seriously contemplated by many companies. Up is now down,down is now up and so on.
But executives at RCLCO caution theCRE community not to make too manyassumptions right now. In a recent webi-nar, they took a look at the myths that haveemerged about the commercial real estateindustry as a result of the coronavirus.
The steady shrinking footprint of apartmentunits over the past ten years is now over.
‘Everyone’ recognizes the need for space.
Larger apartments may indeed become a
trend among some renters but it is too
soon to call this theory a trend yet, said
managing director Erin Talkington. “It is
tricky to decide how many people will
make that decision right now. Not many
people are moving at the moment and
there are some good questions about
how it is not so much the actual square
footage that matters but how you use it.”
It is possible, she added, that what this
really will be is a trend about layouts,
such as fitting an office space in a studio
People are fleeing density because of thepandemic. In high density areas peopleare having negative experiences and areflocking to the suburbs. The urban areaswill fall out of favor as people seek outmore comfortable spaces to quarantine.
Behavioral changes are difficult to predict,said managing director Todd LaRue. Butin this case the trend was already set inmotion before the pandemic began. “Thetruth is a lot of this movement to suburbswas occurring pre-Covid and demographics were driving that trend. What I think is
IT’S TIME TO DEBUNK THESE
COVID- 19 MYTHS
happening is that Covid- 19 is acceleratingtrends that were already underway.” It isclear that home buyers are snapping uphouses, driven by the current ultra-lowmortgage rates and many of these housesare in the suburbs. But LaRue makes thecase that this is a natural tendency that hasbeen underway for years and it will continue for at least another decade. In otherwords, when the pandemic is tamed, therewon’t be a reversal.
Office users will need less space as theiremployees continue to work from home.Office demand will lessen as fewer employees work full time in the office.
This question of future office demand, ofcourse, is being debated fiercely in theCRE community right now and there aregood points to be made for both sides.RCLCO principal Rick Pollack weighs inwith an overlooked observation thatMillennials and younger generations arehaving a harder time working at home asmany are living in or sharing small apartments. There are also social aspects of anin-office experience that are difficult toreplicate virtually.
Likewise from the employer perspective, Pollack said. “Onboarding newemployees is more difficult to do virtually.There is also the cultural benefit of havingpeople in the office and bottom line benefits of collaboration to consider,” he said.
For many companies this does nothave to be an all-or-nothing propositionbut even just shrinking square footagecan come with problems, Pollack added.“Employees need somewhere to sit. Thefeedback on the hoteling or hot deskingtrend has not been positive. People areless productive when they don’t have anassigned desk.”
His conclusion: Office users will continue to use the same amount of space asthey did before the pandemic.