The COVID-19 pandemic has created a disruption unlike anything we’ve ever seen in our lifetimes. Once the health crisis reached U.S. soils, the mass shutdowns of business created an unforeseen event that led to much uncertainty.
Take the commercial real estate business for example. Initially, REITs dropped, and it created some worry. However, experts quickly suggested that the U.S. economy is in a good position to withstand the coronavirus disruption over the long term, with positive transformations allowing for the industry to overcome this unprecedented situation.
Ways business space is used will evolve
The pandemic will undoubtedly create ripple effects through most industries. For instance, some businesses will downsize and shift their employees to remote work. However, as history has shown us, after a devastating event, new innovations emerge that lead to economic growth:
- Tech companies, who have played a large role in keeping the U.S. economy moving, will need more office space.
- Employers will shift employees to remote work, but they’ll still need collaborative space.
- Businesses are likely to be hyper-focused on social distancing so they can continue to operate, and while they might decrease their in-house workforce, they’ll still need the same square footage to maintain the distance they’ll need.
- Commercial builds are likely to crop up in areas outside of densely populated areas as companies look for new ways to integrate social distance space needs.
Essentially, square footage in commercial real estate won’t cease to be needed, but how it’s used will evolve. This means there will be lucrative opportunities in the commercial real estate market, and commercial real estate practitioners have been able to effectively adapt to keep transactions moving forward.
Previous trends may accelerate
Prior to the pandemic, the industry was very healthy, and many industry experts believe the COVID-19 disruption is short term and previous trends will accelerate. Take e-commerce. Both mobile and online shopping have been experiencing exponential growth for years, and they’re seeing more popularity now:
- Recent shelter-in-place and stay-at-home orders lead to a new boom in e-commerce. Reports indicate online sales increased by 39% from March to April.
- Businesses need more space for fulfillment centers in key cities.
- Fulfillment centers require space to accommodate social distancing.
- Companies opening fulfillment and distribution centers will need support businesses in those regions (i.e. housing, shopping and restaurants).
Additionally, this pandemic has shown us that complete reliance on offshoring is risky. People have struggled to get the products and supplies, including medications, they need. As a result, there is high probability manufacturing and production may also shift back to the U.S., meaning these companies will need industrial space to ramp up production.
Travel and tourism rebounding
Many have said COVID-19 has decimated the travel and tourism industries. To a point, it has, but this doesn’t mean it won’t rebound. Instead, we’ll see the travel industry learn new ways to function in a post-coronavirus world:
- Marketers promoting “staycations” and marketing to locals (people will be itching to get out of their houses, but might not be ready to venture too far from home).
- Vacations resembling week-long stays at sanitized vacation rental properties.
- Demand for villas and private home rentals increasing due to social distancing requirements and/or personal preferences.
These initiatives and others, will give the commercial real estate industry a healthy boost. Additionally, CNBC recently reported that reservations for the 2020 holidays have surpassed those for the same time period in 2019 – Thanksgiving (up 38%), Christmas (up 40%) and New Year’s (up 23%). These early indicators show people have the desire to travel and are optimistic of what the future holds. This is great news for commercial real estate.
The coronavirus health crisis has affected all industries across the board on some level. While commercial real estate has taken a hit, this doesn’t mean its future is relegated to a dying industry status. On the contrary, as the pandemic passes, it’ll likely have the opposite effect. There is every reason to believe there will be great opportunities for investors. In fact, earlier in the health crisis, the U.S. Federal Reserve slashed interest rates to near zero. This is a unique opportunity for real estate investors to refinance or buy into investments they might not have been able to do before.
If you’re looking for expert advice on business growth or steps you can take to safeguard your company as the economy recovers from COVID-19, HJR Global can help. Our goal is to help businesses of all sizes succeed in their ventures. Contact us today to get started.