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Ways the Coronavirus Is Changing Commercial Real Estate

COVID-19 has upended the world and commercial real estate has not been immune from the effects. As offices, hotels, restaurants, and many retail stores and malls sat empty – and activity in warehouses escalated in response to the surge in e-commerce – COVID-19 radically altered the industry’s long-term expectations.

Here are some significant effects that are likely to linger, and how they could transform commercial real estate.

White-collar business trends

Many companies have found themselves operating in unprecedented ways to continue conducting business. Businesses that had been resistant to remote work were forced to turn to it. Those that have done so successfully may pivot to a smaller on-site workforce in the long run, reducing their need for pricey office space. The trend towards open-space floor plans could come to an abrupt halt due to fears related to the spreading of contagion. With business travel largely restricted, companies may have discovered that videoconferencing can be as effective as in-person meetings.

The retail shift

Stay-at-home orders prompted many people to shop online for items they had not previously, such as groceries, and many are expected to retain the habit. While the demand for physical stores continues to drop, the demand for the data centers that power online shopping and “last-mile” warehouses that facilitate quick delivery could grow.

Safety and health concerns

Regardless of the property type, many tenants and buyers will have safety and health at the front of their minds. They will expect regular deep cleaning and sanitizing practices and the ability to “social distance” from others. Touch-free technologies – such as voice-activated elevator buttons, automated bathroom doors and motion sensors for faucets, soap and paper towel dispensers – are in the spotlight. Designers may begin to employ antimicrobial materials more often for hardware and minimize tough-to-access (and therefore clean) corners or other places where pathogens can collect.

Tenant negotiations

Tenants experiencing financial difficulties are looking to their landlords for lease concessions or rent abatement. It may be tempting to institute sweeping policies that apply to all tenants. The smarter strategy is to make decisions on a case-by-case basis. Landlords need to develop a decision-making protocol that factors in the tenant’s long-term prospects, renewal probability, default probability and building occupancy rate.

August 24, 2020.Florida Realtors. Four Ways the Coronavirus Is Changing Commercial Real Estate.

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