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Trends in Commercial Real Estate

With the pandemic’s impact on the return to work, trends in commercial real estate are giving a clue to the future of office spaces.

COVID-19 forced a lot of companies to remote work a year ago. Since then it changed how businesses consider about commercial real estate for office space.Many companies are going to look for a smaller space, and they’ve learned that all their employees don’t have to be there at the same time. More companies are now working in blended environments with some staying remote and some returning in-person. So whether they were using the space or not, they were still in business and they were still paying their leases now as the time comes for renewal. They will rethink about that.
People are moving out to offices in the suburban areas, just moving out from the city and taking smaller spaces. Going to work in person used to mean shared spaces, but office furniture companies said that changed too. The number one thing that we see is they want barriers in their offices and make where people work and their work stations taller.

Nowadays the commercial real estate market continues to recover, but sales, leasing, and construction activity remain below year-ago levels. The recovery also remains uneven, with stronger investor interest for land, multifamily, and industrial properties than for hotels, retail, and office properties. The National Association of Realtor’s publication indicates that, as of the start of Q4 in 2020, dollar sales volume for in the large commercial real estate market contracted 56% from the prior year, a year marked primarily by the turmoil of COVID-19. However, the sales volume for land increased 3%. The recovery will come in three phases — today, tomorrow and the distant future. Today, we are closely tracking rent collections in the top five asset classes — industrial, office, multifamily, retail and hospitality. The good news is that they are better than we expected in office, industrial and multifamily, which are tracking at about 90% in rent collections. Retail is under-performing at around 20% to 40%. Tomorrow, which is likely to last for six to nine months, the assets will be reopened and will likely be reopened in phases, but further outbreaks could prompt local shutdowns. The distant future will find that the office will look a lot like it did in the pre-COVID-19 period, but with enhanced wellness features.

CRE emerges from this pandemic looking different than it did before the emergency. Industries, regions and property types will recover at different speeds. Services such as property management, space design, construction, appraisal and analytics will become increasingly important. Brokerage will take a back seat to consultative advice and strategic planning.