Top Issues Facing Commercial Real Estate
The COVID-19 pandemic—and its impact on businesses over the year ahead—is the leading concern among commercial real estate executives, according to The Counselors of Real Estate.
In examining real estate markets, we must consider existing fragility, adaptability to new demands, and potential relevance to new markets. Demand will be defined by the extent to which this crisis leads us to abandon old habits and adopt new ones. The duration of the lockdown has been a factor, and so is the confidence with which we emerge.
Below are the top issues that will likely shape the commercial sector over the coming year:
The pandemic will undoubtedly reshape the commercial sector in several ways. For example, the report notes that the demand for office space may decrease if remote work continues to increase. On the other hand, there could be an increased demand for larger spaces to reduce density in businesses and public places such as airports, restaurants, banks, and some offices as people continue to social distance.
Public and Private Indebtedness
Commercial real estate can be greatly affected by local indebtedness funded by local taxes. The U.S. national debt has increased to more than $26 trillion in just six months. It will impact commercial real estate in many ways, from reduced demand for housing to interest rates that will eventually have to rise to attract new capital to fund our debt, to the ability to repair and upgrade our aging infrastructure and fund projects that will be essential to our future and U.S. competitiveness.
A new focus is being placed on the health of workers, factoring in from the building entry to the indoor air quality, the report notes. Acceleration of planned, medium-density, mixed-use communities will replace old retail formats, with design that embraces walkability and integration of uses that enable continued normalcy in case of subsequent lockdown orders.
Flow of People
Reduced migration and COVID-19 behavioral changes could impact demand for residential, hospitality, and retail real estate. Reports of urbanites fleeing the city due to concerns over the virus are growing. As such, companies may seek expansion in suburban areas to reduce mass transit reliance.
Technology and Workflow
The combination of migration back to the office, the need for reconfiguration and change in operating methods, and the general desire for working remotely are accelerating the adoption of technology in the built environment. Technologies will grow as essential, such as tracking people in buildings, contactless doors and elevators, air and water quality monitoring, airflow and recirculation control, mandatory remote building services, and health screenings for contractors and facility staff.
Environment, Social, and Governance
This is a critical component of real estate investment, from looking to counter the risks of climate change to identifying ESG investment alternatives. While COVID-19 has underscored the importance of ESG issues, the new ‘norm’ is a result of trends already underway, including dramatically changing acceptance of the risks of climate change, innovations in the measurement and tracking of ESG performance, new innovative ESG investment alternatives, the growing influence of millennial investors, and substantial recognition of ESG initiatives from corporations.
June 30, 2020.Realtor Magazine. Top 10 Issues Facing Commercial Real Estate.
Retrieved from: https://magazine.realtor/daily-news/2020/06/30/top-10-issues-facing-commercial-real-estate
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