Retail Reimagined
The shift from brick-and-mortar retail stores to e-commerce has only accelerated during the pandemic, increasing the need for industrial and last-mile logistics facilities. Commercial real estate will be the key. The change in consumer's shopping habits will likely be permanent.
The transition of Shopping Centers
The standard of grocery store-anchoring shopping centers has remained stable; people still need to buy food during a pandemic, but traditional malls have changed. Cities are looking toward rezoning these properties into other allowed uses, such as residential, storage, or offices.
A Return to Urban Apartments and Offices
At the beginning of the pandemic, many city-dwelling residents exited from cities to the more spread-out suburbs. As we’ve seen, many jobs can be done remotely. This is especially true for young millennial employees beginning their careers, many of whom moved in with their suburban parents to save money.
But offices have their benefits and it’s hard to learn the ropes for young employees, or bounce ideas off colleagues or even find a mentor from your laptop at home. With the pandemic being brought under control many major companies are asking employees to return to the city and their offices as quickly as possible.
The Need for Affordable Housing
The pandemic and the corresponding economic downturn brought renewed scrutiny to the affordable housing crisis. That means rethinking how we build affordable housing to decrease construction costs. Modular design can play a beneficial role, as can public-private partnerships. We should also consider repurposing outdated residential and commercial properties like malls and hotels as new affordable housing units.
Rent Payments Remain High Overall
Rent collection for many commercial properties appears steady so far.
The National Multifamily Housing Council’s Rent Payment Tracker found 93.6% of apartment households made a full or partial rent payment by the end of November 2020, a slight decrease from the 95.2% paid in November 2019 and similar to previous months. Increased unemployment benefits, Economic Impact Payments and other legislation passed in response to the pandemic may have played an important role in keeping these rent payment percentages high.
Opportunities Ahead
As with any economic downturn, investment opportunities arise.
· High-quality multifamily assets will remain viable,
· Affordable housing is a priority
· Retrofitting properties with sustainable, eco-friendly products
· Repurposing old or empty commercial properties to fit the needs of the current communities
· Using Technology to operate more efficiently
Beyond specific asset classes, we believe these trends may also pick up steam in 2021:
Properties with new purposes: Repurposing properties will be a new focus in 2021 and beyond. Due to COVID, our homes became our offices, schools, and gyms. Developers and commercial property owners are rethinking the way empty properties are used. For example, traditional malls have been converted to warehouses, storage units, and affordable housing. Likewise, hotels can serve as extended-stay lodging or shared office space for people working remotely throughout the pandemic.
Sustainability makes economic sense: The country is quickly moving toward alternative energy. Developers are moving to incorporate more eco-friendly building materials like stamped concrete, sheep’s wool insulation, and reused metals in currents projects. They are also incorporating sustainable products such as solar panels, LED lights, and thermo-heating elements into future builds.
Technology on the rise: Overall, the commercial real estate industry has been slow to adopt digital solutions. But simplifying property management can reduce staff time and costs, provide more payment alternatives, and decrease payment times—all of which can help your bottom line.
Tackling the Upcoming Year
For 2021- 2022 the focus for developers and commercial real estate owners will be highlighting affordable housing builds as well as focusing on the accelerated growth of e-commerce, through distribution centers and pop-up retail locations. Indicators point to the continuation of remote work at least through 2022.
For developers and property, owners open themselves up to new possibilities.