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COVID-19 and its effects on the commercial real estate market

January 4, 2021

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As states reopen, many small businesses have to rethink how they operate. Photo of on an "open" sign by Free to Use Sounds via Unsplash.

COVID-19 caused a lot of people to stay home over the last year, which has affected many businesses and industries. For some, the effects have been positive. Online businesses like Amazon have thrived as people have increasingly gone online to fulfill their shopping needs. Industries like commercial real estate, however, are feeling the negative effects. 

Commercial real estate is an industry that relies heavily on businesses paying rent for the spaces that they occupy. However, with customer foot traffic coming to a stand still that has led to businesses rethinking their need for space. While the demand for these spaces are down now, there is concern that this could be a long term trend, possible demand destruction

So how can business journalists investigate and give their readers a clearer understanding of what is going on?

Retail 

The increase in available empty spaces is most likely due to retail stores being closed because in-store business has slowed down dramatically during these times. So journalists should ask:

  • Do retailers believe there will again be a demand for space when the outlook for in-person shopping is more positive?
  • For retailers that have moved their business online: What are the positives and negatives of the switch? What are some changes that they want to adapt for the long term? Will they stay online or go back to in-person?

Offices

Besides retail, there are businesses that rely on commercial real estate for office spaces. However, with people predominantly working from home right now there are many spaces that are empty and not being used. Questions to ask:

  • Are businesses trending towards keeping their employees at home or are their plans to bring them back? 
  • If they do bring employees back, are businesses considering downsizing the spaces they lease? 
  • If employees stay home, what will businesses do with their spaces for the remainder of their leasing contracts? 

What’s going well

Although, the industry has mainly felt the negative effects. There are some bright spots. Spaces that are connected to e-commerce (storage and data terminals) have a more positive outlook during this time because of the increased traffic online. Possible questions:

  • How are real estate companies trying to focus on this part of their market?  
  • Do they expect the demand for spaces from e-commerce companies to continue to increase? 

One final question to ask: How have policies that have protected individuals and small businesses during this time negatively affected commercial real estate companies?

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