COVID-19 has changed the rules for commercial real estate. Unlike residential real estate, which has actually seen a spike in sales and spirited offers – commercial real estate has had to work through multiple concerns and uncertainty. We will discuss these factors. We do want to report, however, that the office and industrial markets in Greater Lowell are once again active. The Edge Group, Inc. has seen increased traffic from smaller users – even food based businesses – seeking new space. Others are seeking to invest, seeing future opportunities for income and the tax benefits that can come with real estate assets.
The real estate world, like other segments of the economy has seen wild swings since March and the crushing impacts of the coronavirus. For example, unemployment, which was in the 3% range in Greater Lowell is presently just over 20% in Lowell. Consumer confidence fell 20+ percent in April, but rebounded, up 14% in June. Listings of residential homes fell dramatically with the virus, however, the price of home sales increased nationally by 5.1%. It is fair to say that uncertainty was the rule of the past quarter.
Some other takes to share:
The Need to Adapt
“There is little doubt that the built environment will need to adapt as a result of these unfortunate circumstances. The bigger question is whether the office has changed forever or if we even need offices at all. The unequivocal answer to both questions is yes. Leaders that perhaps weren’t historically on board with the idea of remote working have seen irrefutable evidence that individuals can be equally as effective while working away from the office.”
–Cushman and Wakefield
Behavioral Changes That May Outlive the Crisis
Real estate owners and operators across almost every asset class are considering several potential longer-term effects of the coronavirus outbreak and the required changes that these shifts are likely to bring.
For example, within commercial office space, the multiyear trend toward densification and open-plan layouts may reverse sharply. Public-health officials may increasingly amend building codes to limit the risk of future pandemics, potentially affecting standards for HVAC, square footage per person, and amount of enclosed space.
The COVID-19 experience could also permanently change habits that may affect demand for other real estate assets, such as hospitality properties and short-term leases. The shift to e-commerce may also further boost already high demands for industrial space.
The depth and breadth of economic impact on the real estate sector is uncertain, just as the scale of human catastrophe from the pandemic is yet to be seen. However, behavioral changes that will lead to significant space becoming obsolete in a post-coronavirus environment seem imminent. Given the potential for transformative changes, real estate players will be well served to take immediate action to improve their businesses but also keep one eye on a future that could be meaningfully different.
– McKinsey and Company
Consulting and Management
Opportunities for an Enhanced Urban Landscape
Urban specialists, including Jeff Speck, who visited Lowell and made walkability and other design suggestions recently engaged in an interesting exercise in Philadelphia. They discussed making the most of the impacts of the coronavirus in terms of more urban space, enhanced bike lanes and other changes. Lowell will want to take not of opportunities borne of traumatic events. See the link below.
For more insight on this brave new real estate world, please call or email us. Our firm focusses on the Merrimack Valley market. This focus provides familiarity with local conditions, governance and other important relationships. Get the Edge on your competition. Call or email us today.