Never, in our over 25 years in the real estate industry, have we ever seen headlines like this:
- RioCan REIT ‘taking the gloves off’ with larger tenants failing to pay rent: CEO
- Google’s Real Estate Pause Shows Cracks in Tech Office Demand
- The World’s Biggest Banks Embrace a New Breed of Offices
- Working from home in the COVID-19 age may herald a new era in the office-tower business
- Landlords, Commercial Tenants Negotiate Rent Breaks Amid Coronavirus Disruption
With almost one-third of the entire world on some form of lockdown, we are in such unchartered waters that it is impossible to say for sure what the post-COVID-19 environment will look like. Never before has there been a global phenomenon that has impacted the lives of so many, and on such a huge scale.
Thankfully, we have the technology in place to help many people adapt to new social distancing rules and help businesses continue operating. Can you imagine if this had happened in the mid-90s? Imagine trying to join a video conference call with dial-up… or staying in touch with friends without social media or texting… or online shopping without any online stores?
What will the “new normal” for commercial real estate look like? No one seems to be able to agree, except to say that things will be different.
Office Towers: Going the Way of the Dodo
One of the more popular theories floating around is the death of office space. Many businesses that were reticent to allow employees to work from home before are now seeing that virtual work can be just as productive as in-the-office work.
Given that real estate is generally a large cost for businesses, a logical prediction is that post-COVID-19, businesses will encourage more of their workforce to work from home in order to save on office space. While this may be welcome news for some employees, it is undoubtedly terrifying for owners of office space. Not to worry landlords, we beg to differ!
At M Commercial, we doubt office space is going the way of the dodo bird anytime soon. Sure, there will be some changes, but a mass exodus from tower offices to home offices is highly unlikely. Why? Because virtual interaction is not the same as physical interaction and we, as humans, thrive on physical interaction - deep down in our DNA, we’re programmed to want to be around other humans.
Yes, amazingly fast internet speeds and video conferencing software come close to simulating human interaction, but don’t quite emulate it. Status meetings using video conferencing software are efficient and productive; however, a brainstorming session doesn’t quite flow as smoothly as having all participants in the same room.
Working remotely opens employees up to a whole host of new workplace etiquette rules, some with serious ramifications. Some people find video conferencing from home an invasion of privacy, not wanting to share their living rooms or home offices with co-workers. Then there’s the planning commissioner who had to resign from his job after a video of him throwing his cat during a conference call went public and the professor fired for sharing his interest in “busty college girl” porn with his entire class. Learning to navigate the new social norms of working via video conference can be confusing and many employees may welcome back the days of the good ol’ office meeting with stale coffee and donuts.
Will months of COVID-enforced working-from-home result in permanently altered worker preferences? We don’t think so. Much like a two-week vacation to Spain is far different than living there for a decade, we believe the novelty of working-from-home will soon wear off and people will instinctively be drawn back to the office and real human interaction.
Retail < eTail
The “retail is dying,” rhetoric is nothing new; however, many believe the COVID-19 pandemic will substantially accelerate its demise.
Shopping from your couch has never been easier. A smartphone puts the world at your fingertips and makes buying anything from food delivery to dog toothpaste to new patio furniture as easy as click, click, thumbprint.
Shipping times have increased at almost exponential rates, with some eTailers such as Amazon offering same or next day delivery.
While Millennials were already very comfortable shopping online and Gen Z basically grew up online, the biggest impact will be seen in the online shopping habits of Gen Xers and their Boomer parents. Forced to migrate their shopping online, many in the 40+ bracket might enjoy the convenience so much they make the shift permanent.
Will eTail be the death of retail? Not a chance. There will always be a role for retail and certain experiences will never be replicable online; however, there will be retailers who won’t make it. Those who do survive will be the ones that can successfully execute an omnichannel experience for customers - merging on- and off-line experiences into one seamless brand experience.
Our COVID-19 Prediction
At M Commercial, we like to give our clients the straight goods, even if it means we lose out on business - like the time we stopped a client from making a $2 million mistake. But given the unprecedented nature of what’s happening right now, the only thing we can tell you with certainty is that our commitment to you will stay the same.
We are committed to providing our clients with the most honest, uncomplicated, and effective real estate solutions for their business goals. No matter what environment emerges from under the COVID-19 cloud, count on M Commercial Realty for sound real estate advice you can bank on.
By Steve Peres
Learn more about Steve Peres.