What effect will COVID-19 have on the commercial real estate market?
At the end of 2019 and beginning of 2020, commercial real estate professionals were cheering at the state of the market. Businesses were thriving, moving, expanding, occupying previously empty building and building new. The market was good, with the emergence of COVID-19 as a global pandemic, the market has been flipped on its head.
Vern Oakley, President of Asset Management at Culmen Real Estate Services, a full-service property and asset management firm, said Culmen has spent much of this time helping owners, investors and tenants navigate the immediate concerns of functioning during an emergency. Oakley said Culmen is working to keep buildings operational, but is also looking at what effect this crisis will have in the long term for businesses that were so sure of where they were heading in February, but lost at sea in March.
Especially for offices starting to come back to work, some of the big trends we’ve seen in recent years for commercial real estate could possibly be reversed, Oakley said, as we see offices start to wonder what the future will look like for businesses as they return to work?
The push to open office plans – One trend Culmen had seen gain huge popularity was the push to open and shared office spaces. As a manager of several office buildings, many of Culmen’s tenants had been able to fit more people into smaller, collaborative spaces by having a contemporary open office space. But in a post-COVID world, companies are likely to require more space per person for employees to remain healthy for those businesses that require workers to come back to the office at all.
This could mean working with offices to reconfigure plans and possibly a move toward offices with more traditional offices for personal space.
The rush to locate in urban areas – Across the country, Oakley has been watching the trend push toward highly-dense urban areas, but is watching as large corporations start to rapidly rethink those plans. Larger, more spaced out suburban centers are likely to start to appeal to offices needing more space per person and to protect their employees and the business from the implications of catastrophic events that could hit harder in densely populated urban areas.
This could mean substantial growth for suburban markets and a re-evaluation of urban spaces.
The popularity of hotel desks – It will be interesting to see the effects on coworking and hotel desks, Oakley said, as we see people who may not want to occupy the same space as several other people who may be in and out.
Reluctance to working from home – In the time of COVID-19, companies were thrust out of wondering if it could work to knowing precisely how it had to, and the implications of businesses making it work will mean businesses will come back to work with new ideas on what they do and don’t need in an office space. Coming out of this, we are likely to see offices needed less space in physical locations, but more space per person in the locations that do require physical meeting and collaboration space.
This will mean real estate professionals will need to get creative and start thinking about new ideas for how the modern office will look.
For Culmen, whose job it has been to help owners and tenants think long term about real estate investments, keeping a thumb on the pulse of real estate trends will be even harder as we navigate our way out of the global pandemic, but this is exactly where critical and creative thinking will come into play.
It will not be business as usual, but for the industry to stay afloat, it will mean providing creative and new solutions that keep businesses operational and effective.
“This is going to be an entirely different world on the other side,” Oakley said. “But we are going to navigate through it together.”