Thankfully 2020 is almost in the rearview mirror, and 2021 is rising from its ashes. Yet for those of this in the commercial real estate industry, uncertainty abounds. While most predict the impacts of COVID-19 will start to diminish correlating with the rise of vaccination, the impacts to commercial real estate will continue to resonate in the months, and years to come. Some of our predictions for 2021 for local the local development community are spelled out here.
The change to at home shopping will continue to impact the industrial landscape for those involved in e-commerce. More last-mile services and regional centers will continue to be needed since consumers have come to expect arrival of goods within a day. The concern about over reliance on China may increase need for supplies to be more readily available in the United States. And of course, the impacts of the election have yet to be charted. Industrial will continue to be a top-performer locally and nationally, with areas of interest being near highways and the airport
Data points to employees wanting to return to the office, according to a Cushman & Wakefield study that we stumbled across, finding that fewer than 10% of employees want to permanently work from home. Based on this, for companies in existing leases, we predict not much will change if they have weathered the economic storm other than pressure on landlords for HVAC system upgrades. For companies facing renewal and relocation changes, we think the shift that was already taking place away from open workspaces will continue to expand. We predict more configurable space and shift to private, albeit perhaps smaller offices.
Predicted impacts to multifamily will vary with location and product type offerings. The pandemic has made our home experience a priority for those who have been spending more time there than ever. Comfortable in-unit amenities and spaces that can be a separate work or study space will continue to be sought after as people have become accustomed to working from home. The space afforded by well-planned suburban communities will also be desirable. Additional square feet and access to greenspace in the suburbs will demand consideration by those previously attracted to higher density areas. Our region continues to offer easy access to home ownership when compared to other areas, so multifamily interest may wane as some pivot to the security in home ownership.
With the losses suffered in 2020 as the result of the pandemic, operators and investors have a long way to go before being able to confidently bring new projects to market. We were disappointed, (but not surprised) to see some projects, such as Priam Enterprises Delaware Avenue boutique hotel shift to apartments. As the world becomes vaccinated, pent up travel demand may be unleashed, bringing much needed relief to those operators and communities that rely on tourism. Our prediction will be that 2023 will be the year we start to see an increase in hospitality development again.
Retail was unfortunately already in a free fall before the pandemic. A drive down Buffalo’s Elmwood Avenue revealed this last January. The retail that will succeed moving out of 2020 will offer consumers the following:
- Shopping will be entertainment and savvy retailers will need to capture consumer interests far beyond need. The consumer will need to want to go there.
- Multi-channel. Small retailers can no longer rely on having a Web site as all that is required of them. Their consumers must have the same experience in store and online and be able to get their item with the convenience they can obtain with a larger retailer. They also want to browse through social media and feel connected with their seller online and instore.
- In a competitive landscape, consumers have price information at their fingertips. Wise retailers must think of ways for customers to feel that they are getting something extra. Same day delivery, gift wrapping, curated offerings that change frequently should be considerations.
Landlords will have to become stronger partners with their retail tenants, participating in planned shopping districts or blocks and working with communities to build on events that draw shoppers.
If we return to the predictions for 2020, our efforts at forecasting could be considered an ill-fated effort. Yet in the world of commercial real estate, predictions are paramount, and to move forward we must try to normalize our efforts.