Numbers don’t lie: Proximity is a problem for CRE
Retail, tourism, student housing falter while commercial markets stay strong
Recent research from Propmodo and Tableau give commercial real estate executives new food for thought. While levels of enthusiasm range, The general consensus is that office and retail locations with higher population density and tight occupancy will suffer more than commercial space where there's room for physical distancing.
There is also much support for the idea that - though the swath cut through commercial real estate by Covid-19 will be wide - the wounds can be all be healed, maybe sooner than we think.
Retail, healthcare and student housing will be hardest hit
To date, the commercial real estate’s industry's reaction to the COVID-19 threat has been generally optimistic as to the future ahead. That is certainly the tone of Propmodo's recent publication, The Commercial Real Estate Industry’s Reaction to the COVID-19 Threat.
In it, Propmodo states ". . . the impacts of the virus more heavily focus on properties that generally necessitate a high occupant density or have an underlying transient nature. This includes retail properties (also hit by the non-essential business shutdowns hitting the world), healthcare facilities, hospitality properties, and student housing.”
“Amongst surveyed professionals, the consensus (64%) say that capital markets activity will rebound at some point between summer 2020 and spring 2021. This seems to be at odds with the widely-held view within commercial real estate that the market, long due for a correction, has been deeply damaged by COVID-19.”
While 97 percent of the executives surveyed believe that commercial real estate market prices will take a hit, few believe that the industry will be adversely impacted for long. The rosy Propmodo report also notes that lower prices mean lower property taxes for customers and leasing agents, which should help with recovery from pandemic pricing.
Tourism, sports and the gig economy are suffering
As recently reported in GeekWire, Tableau, of Seattle, has created a COVID-19 tracker to add to the tools available to developers and scientists fighting the virus. Kristin Henry, a computer scientist specializing in science and data visualization, and members of the Data Visualization Society catalogued what else related to COVID-19 would be worthwhile for researchers and policymakers worldwide.
The ideas Tableau and guests generated included thinking around:
- Lifestyle changes people are making, including those recommended as a result of social distancing, and how they will change the way we work;
- Jobs and industries most likely to be impacted by COVID-19, including tourism, sports, and the gig economy; and
- How data is being used to help people understand the changes.e.g.The New York Times recently visualized workers who face the greatest coronavirus risk; how data already showing the effect the virus on unemployment claims, and how those map to different locations and industries.
The Propmodo report also shows strong interest on the part of CRE brokers in protecting assets and providing for contingencies in future contract negotiations:
Our data also indicates a shift towards a number of adaptations in the aftermath of COVID-19 . . . (33%) said they will evaluate their leases for clarity on some of the questions that have persisted relating to force majeure, co-tenancy clauses and other details.
A full 23% of the CRE respondents surveyed expect to continue to use remote work arrangements more frequently. This is in-line with what other surveys are capturing in non-industry specific research.