With COVID-19 cases in the U.S. rising sharply, there are plenty of challenges to come as businesses race to cut costs and stay afloat.
This is set to trigger mass changes in commercial real estate.
Among them, a long-term shift to at least some remote work is expected, most likely on a hybrid basis with a mix of home and in-office work. This will place greater pressure on office demand, as companies may need access to less space; it may also elevate lease renewal risk and/or reduce rental rates.
Landlords will be forced to retrofit to accommodate changes in the way we utilize office space. Buildings that can adapt to health and safety requirements, such as physical distancing, will be in demand — while older buildings that cannot accommodate certain requirements without attracting costly alterations may struggle, or become obsolete.
There may also be a shift in the retail sector away from physical brick-and-mortar stores toward e-commerce. This has been happening already; COVID-19 has accelerated the trend with many stores placing greater focus on online sales out of necessity.
Will it become a buyers’ market? Tenants across multiple industries may find themselves with the opportunity to negotiate lower rents with friendlier lease terms, thus creating cash flow volatility and long-term value decline for non-core property owners.
