The Unpredictable Future of Commercial Real Estate During COVID-19

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The Unpredictable Future of Commercial Real Estate During COVID-19

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The widespread and immediate impact of COVID-19 on commercial real estate has left many wondering where the industry is going to go from here. Here are some possibilities to be prepared for if you plan to buy or sell commercial space during the pandemic.

How the Crisis Has Impacted Commercial Real Estate

Due to virus-spread-reduction measures like shut-downs, the pandemic had an immediate effect on the ability of businesses to continue their operations. As a result, the markets experienced a dramatic plunge. Ultimately, this may have a number of effects on commercial spaces.

Most-Affected Properties

Government stay-at-home orders coupled with voluntary social distancing negatively affected hospitality and retail spaces most drastically due to the instant drop in patrons. Hospitality businesses, in particular, are being hardest hit because they cannot reopen until travel restrictions are lifted.

The Possible Future of Retail Spaces

As more individuals remain at home, options for online shopping have become far more appealing. Will this render retail spaces obsolete? Likely not.

Customers willing to adopt the required mask-wearing, social distancing, and sanitizing policies of various stores continue to visit these locations. This is most true for grocery stores and other sources of non-essential goods. However, in the long term, there could be a shift in consumer behavior, simply due to the fact that more consumers are only purchasing what they need and, therefore, shopping less often.

Retail’s future could include a stronger e-commerce presence, as well as more direct-to-consumer options, such as home delivery and curbside pickup.

The Possible Future of Office Spaces

Flexible hours are not a new phenomenon; however, since the start of the pandemic, more employers have been offering this option. Although some suspect this will be the end of office space, experts say this won’t be so. Social distancing mandates don’t necessarily have to mean a shutdown. Many offices are now modifying their spaces to allow for an adequate distance between employees.

Although flexible working and office modifications are occurring, would-be owners of commercial property for sale are unlikely to experience too drastic a drop in rental revenue in the short term, as many tenant businesses have contingency plans in place. Depending on the virus progression, the long term may see differences in the way office spaces are utilized.

Potential Real Estate Investment Strategies and Policies

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One important consideration for all would-be buyers and sellers to include in their real estate strategies is adaptability. Spaces may need to be used for other purposes, such as residential or testing facilities, and buyers must be willing to prepare for these potential scenarios.

Rent amounts may need to be adjusted to meet potential slowdowns in tenant business. Locations with shared amenities may need to consider temporarily shutting down these areas.

If you’re thinking about a commercial property purchase, it’s best to work with an experienced broker who can add value to your investment while protecting your interests. TB-RE has over two decades of experience. Find your ideal property by calling us today: (312) 473-1764.