Written By: Jacquelyn Annete García Vadnais
In 2020, commercial real estate in the United States underwent a transformation that will likely last for many years to come. Prior to the Covid-19 pandemic, there was already a trend to reduce the cost of overhead for commercial real estate, particularly for startup companies and retailers. However, once Covid-19 hit, the commercial real estate market was put into a unique position with major brands attempting to break leases, substantial closures to offices and brick and mortar stores, and CEOs considering whether their employees could work entirely remotely going forward. As a result, the commercial real estate market within the United States has faced a unique position that it has not seen previously. In order to learn more about important commercial real estate trends in the United States, review the information below:
Important Commercial Real Estate Trends in the United States
Impact of Covid-19 Pandemic on Major Cities
The Covid-19 pandemic has had a major impact on the larger cities within the United States. The shift to remote working has caused there to be a massive exodus from cities such as New York, San Francisco, and Chicago. What has come with this shift is an increase in crime, lack of proper state funding to combat crime issues, and overall less people visiting these cities for tourism and spending money to keep commercial tenants afloat. For major retail stores or restaurants, this transition has been devastating. It has also made many business owners question whether they can afford to invest in a lease in a larger city and whether it is fiscally worthwhile for them to do so.
Caution Towards Living/ Working in High Density Areas
Due to the nature of Covid-19, high density is now seen as something to be concerned about. It is predicted that commercial real estate developers will have to pivot from the classic larger mall model or area with a large group of big box retailers and restaurants in the future. Some larger malls have been pivoted to warehouses to support the increased demand for logistics warehouses with the shift of e-commerce. Commercial real estate is likely to see more shifts such as these to pivot from the high-density model that had been successful in the past.
Offices Leases May Not Be Renewed or Tenants Will Leave Early
One of the major issues that has occurred during the Covid-19 pandemic is that there has been a substantial shift in earnings for companies in certain industries, particularly the restaurant industry. Some businesses went from profitable to making zero for an extended period of months as lockdowns progressed. Those restaurants prepared to financially handle such a shock to their accounting books, have had to figure out how to make rent payments along with covering their other costs. What this has led to is commercial tenants attempting to renegotiate their leases with their landlords and leaving early where possible by making a lump sum payment.
Developer Shift Focus to Large Dwellings with No Common Retail Spaces Included with Apartment Buildings
One of the substantial shifts has been people moving to larger spaces. Where commercial real estate developers and businesses had obtained success with a luxury apartment complex with stores or restaurants inside, this idea is now being reconsidered to meet the desire for individuals to live in larger spaces. Common areas will be the area of concern on these projects and commercial real estate developers will likely find innovative ways to solve this issue and pivot to the current market’s demands.
Investor Will Shift to Investing in Smaller Suburban Hubs
Another area that has been impacted by the Covid-19 pandemic has been how commercial real estate investors will be investing. Due to the decision of many companies to leave their existing larger offices, their employees have moved home with their families out of necessity or they have decided to find a living situation out of a major city due to crime concerns. What this means is the potential for commercial real estate investors to consider investing in smaller suburban hubs, which could greatly shift the commercial landscape in those smaller cities and towns.
Remote Offices and Co-Working Spaces
Prior to the Covid-19 pandemic, there was a trend for startup companies to invest in a co-working space to save capital on having a larger office. Larger companies, while they had traditional offices, were already considering which offices were necessary to continue when so many remote positions were available. Covid-19 shifted these trends to have entire companies deciding to leave a major office and companies just starting in co-working spaces to decide whether they actually needed that space or whether it was better to start remotely due to far too many companies in one high density office area. While this debate is ongoing, there will likely still be a need for traditional offices; however, there will be a trend in companies considering very carefully whether they will be able to save capital by not having a traditional office in a highly populated area.
Final Remarks
The commercial real estate landscape has undoubtedly shifted in the United States during the Covid-19 pandemic. It has truly caused many major companies to decide whether their previous model was working and what commercial real estate they actually needed in order to conduct their business. Major retailers, and restaurants that were always trying to be located in major cities have undergone a shift as well trying to see what portions of their business they are able to pivot to e-commerce and whether they are able to exit their high cost leases that they can no longer sustain due to the unexpected closures during the Covid-19 pandemic. As the United States progresses out of the Covid-19 pandemic, it will be fascinating to see how the commercial real estate landscape continues to shift and what new and innovative opportunities exist for investors and businesses to take advantage of.
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Jacquelyn Annete Garcia Vadnais is an Investment Consultant and field expert blogger for Barracuda Consulting.
Jacquelyn has a JD/ MBA from Suffolk University, an LL.M in International Law from the University of Miami, and a B.A. from the George Washington University in International Affairs with a Concentration in International Politics. Jacquelyn speaks English, Spanish, French, and Portuguese and has lived in ten countries. Jacquelyn has done work for firms such as Boston Consulting Group and has worked with firms based in over ten countries in the fields of Real Estate, International Law, Expat Living, International Business, Forex Trading, and Travel. She has also volunteered her time and expertise at the Victims Rights Law Center based in Boston, MA.
Please leave your comments below. If you would like to subscribe to our newsletter, click here: https://tinyletter.com/barracuda-consulting. To purchase a full real estate report, or to access a complete suite of investment advisory services please contact us: https://www.barracuda-consulting.net/contact.
In 2020, commercial real estate in the United States underwent a transformation that will likely last for many years to come. Prior to the Covid-19 pandemic, there was already a trend to reduce the cost of overhead for commercial real estate, particularly for startup companies and retailers. However, once Covid-19 hit, the commercial real estate market was put into a unique position with major brands attempting to break leases, substantial closures to offices and brick and mortar stores, and CEOs considering whether their employees could work entirely remotely going forward. As a result, the commercial real estate market within the United States has faced a unique position that it has not seen previously. In order to learn more about important commercial real estate trends in the United States, review the information below:
Important Commercial Real Estate Trends in the United States
Impact of Covid-19 Pandemic on Major Cities
The Covid-19 pandemic has had a major impact on the larger cities within the United States. The shift to remote working has caused there to be a massive exodus from cities such as New York, San Francisco, and Chicago. What has come with this shift is an increase in crime, lack of proper state funding to combat crime issues, and overall less people visiting these cities for tourism and spending money to keep commercial tenants afloat. For major retail stores or restaurants, this transition has been devastating. It has also made many business owners question whether they can afford to invest in a lease in a larger city and whether it is fiscally worthwhile for them to do so.
Caution Towards Living/ Working in High Density Areas
Due to the nature of Covid-19, high density is now seen as something to be concerned about. It is predicted that commercial real estate developers will have to pivot from the classic larger mall model or area with a large group of big box retailers and restaurants in the future. Some larger malls have been pivoted to warehouses to support the increased demand for logistics warehouses with the shift of e-commerce. Commercial real estate is likely to see more shifts such as these to pivot from the high-density model that had been successful in the past.
Offices Leases May Not Be Renewed or Tenants Will Leave Early
One of the major issues that has occurred during the Covid-19 pandemic is that there has been a substantial shift in earnings for companies in certain industries, particularly the restaurant industry. Some businesses went from profitable to making zero for an extended period of months as lockdowns progressed. Those restaurants prepared to financially handle such a shock to their accounting books, have had to figure out how to make rent payments along with covering their other costs. What this has led to is commercial tenants attempting to renegotiate their leases with their landlords and leaving early where possible by making a lump sum payment.
Developer Shift Focus to Large Dwellings with No Common Retail Spaces Included with Apartment Buildings
One of the substantial shifts has been people moving to larger spaces. Where commercial real estate developers and businesses had obtained success with a luxury apartment complex with stores or restaurants inside, this idea is now being reconsidered to meet the desire for individuals to live in larger spaces. Common areas will be the area of concern on these projects and commercial real estate developers will likely find innovative ways to solve this issue and pivot to the current market’s demands.
Investor Will Shift to Investing in Smaller Suburban Hubs
Another area that has been impacted by the Covid-19 pandemic has been how commercial real estate investors will be investing. Due to the decision of many companies to leave their existing larger offices, their employees have moved home with their families out of necessity or they have decided to find a living situation out of a major city due to crime concerns. What this means is the potential for commercial real estate investors to consider investing in smaller suburban hubs, which could greatly shift the commercial landscape in those smaller cities and towns.
Remote Offices and Co-Working Spaces
Prior to the Covid-19 pandemic, there was a trend for startup companies to invest in a co-working space to save capital on having a larger office. Larger companies, while they had traditional offices, were already considering which offices were necessary to continue when so many remote positions were available. Covid-19 shifted these trends to have entire companies deciding to leave a major office and companies just starting in co-working spaces to decide whether they actually needed that space or whether it was better to start remotely due to far too many companies in one high density office area. While this debate is ongoing, there will likely still be a need for traditional offices; however, there will be a trend in companies considering very carefully whether they will be able to save capital by not having a traditional office in a highly populated area.
Final Remarks
The commercial real estate landscape has undoubtedly shifted in the United States during the Covid-19 pandemic. It has truly caused many major companies to decide whether their previous model was working and what commercial real estate they actually needed in order to conduct their business. Major retailers, and restaurants that were always trying to be located in major cities have undergone a shift as well trying to see what portions of their business they are able to pivot to e-commerce and whether they are able to exit their high cost leases that they can no longer sustain due to the unexpected closures during the Covid-19 pandemic. As the United States progresses out of the Covid-19 pandemic, it will be fascinating to see how the commercial real estate landscape continues to shift and what new and innovative opportunities exist for investors and businesses to take advantage of.
--
Jacquelyn Annete Garcia Vadnais is an Investment Consultant and field expert blogger for Barracuda Consulting.
Jacquelyn has a JD/ MBA from Suffolk University, an LL.M in International Law from the University of Miami, and a B.A. from the George Washington University in International Affairs with a Concentration in International Politics. Jacquelyn speaks English, Spanish, French, and Portuguese and has lived in ten countries. Jacquelyn has done work for firms such as Boston Consulting Group and has worked with firms based in over ten countries in the fields of Real Estate, International Law, Expat Living, International Business, Forex Trading, and Travel. She has also volunteered her time and expertise at the Victims Rights Law Center based in Boston, MA.
Please leave your comments below. If you would like to subscribe to our newsletter, click here: https://tinyletter.com/barracuda-consulting. To purchase a full real estate report, or to access a complete suite of investment advisory services please contact us: https://www.barracuda-consulting.net/contact.
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