Published by Hannah Cano January 4, 2021
Since last March, the effect and magnitude of the global pandemic has effected more change than most of us have experienced in our lifetimes, with more—and as yet unknown—effects still to come. It’s no surprise that the pandemic greatly reshaped, and will continue to reshape commercial real estate. While the changes and emerging trends are too numerous to detail fully, based on our experience as both brokers and asset managers, we want to highlight some of the key developments we see emerging in the core sectors of our regional market: retail, office, and industrial.
Retail: Forced closures and occupancy/operational limits have clearly hit the retail sector the hardest. Retail is focused on the customer experience, and after state mandated lockdowns, this experience changed overnight. In this Covid age, we see foot traffic dramatically reduced as many are making only essential trips. For many restauranteurs, the customer experience has moved outdoors. Retailers have been forced to be creative and even reinvent their businesses in order to survive. Many retailers have achieved survival and even success in their ability to adapt to a curbside business model, tailor their menus for to-go or delivery orders, or create a comfortable and inviting outdoor experience (no easy feat in the Pacific Northwest!). Thankfully, we have seen few retailers close during this time which is a testament to the resilience and grit of these business owners and also to the our community’s commitment to support local business over their own convenience. The “pandemic retailer” must be able to pivot and adapt to an everchanging environment. Frankly, we continue to be inspired by the hard work and undaunted human spirit of our local business owners. Having curbside pick-up options and/or providing local delivery is a trend that we believe will continue after the pandemic, as it has allowed small retailers to compete with the convenience that online shopping provides.
Office: With mandates and recommendations on limiting office capacity, working from home has become a reality for many. Which prompts the big question: will this home officing trend continue, and even predominate after Covid-19 is brought under control? And, if so, to what degree? First, some anecdotal facts—we continue to take calls for companies looking for office space, and we continue to sign lease renewals with existing office tenants. However, we also have seen some companies “hit pause” on making office space decisions. We consistently hear, “we might need more space, or we might need less space.” Yes, office space may look different for many companies, but the basic need for office space is not going away. In fact, based on our own experience and feedback from the community, we are “Zoomed out”. Remember, when the pandemic began, remote working was not a new concept. Rather, over the past 20+ years there has been no shortage of speculation and theorizing about the continued need for office space in the face of the new technology age that allows employees to work virtually from anywhere, citing the obvious business benefits of reduced overhead and employee convenience/travel efficiencies. Covid-19 essentially forced the office community into a mass, long-term telecommuting experiment that many companies had either never considered, had only tried on an ad hoc, non-systemic level, or had rejected outright. The returns on that experiment are not yet fully in, but, along with the predicted positives, a few negatives have emerged. Thanks to web-based platforms like Outlook and Zoom, remote working is possible, but it is just that—remote. Workers are isolated and lack cohesion and synergy that an office environment provides. In short, most are finding that online contact is a poor substitute for in-person interaction. Further, from an efficiency standpoint, simple, quick and productive conversations once taken for granted are now scheduled phone calls that are often postponed, and distractions for many–kids, pets, or family dramas result in understandable loss of focus. Remote working lacks the interaction, connection, spontaneity and creativity that many traditionally office-based jobs require. We believe this is one reason we are not seeing evidence of sweeping office closures in our market. For now, the office market is steady, with some office users requesting less space as they are now more open and prepared to allow flexibility for employees to work from home on a case-by-case basis.
Industrial: This sector in our market is the most unchanged by Covid-19. For most of the industrial tenants in our portfolio of managed properties, it is business as usual. We consistently receive calls from new and existing businesses for warehouse space, and we continue to have the lowest vacancy in the industrial space market.
This pandemic experience has been one, huge social experiment, not unlike an elimination diet. Removing so much from daily life has highlighted what is important. For many, it has been a time to reflect on what has and has not been working both professionally and personally. While there have been so many hardships for so many in our industry, we are so greatly encouraged by the ingenuity and resilience of business owners and landlords alike. We are all connected indeed, and have come together during a challenging season. No doubt our industry will look and operate a little differently. We will be changed, but will come away wiser and stronger.
Here’s to 2021!
Published by Hannah Cano