Commercial real estate trends set to change the industry

Original Article by RoseLawGroupReporter

With shifting behaviour comes a host of new opportunities.

The coronavirus outbreak will accelerate commercial real estate trends that had been forming and cause dramatic changes in the industry faster than had been anticipated. The crisis will result in some short-term contractions in the industry, but will lead to a long-term expansion for commercial real estate generally, particularly in the industrial and warehouse sector.

During a special webinar last week Dr. Timothy Savage of New York University, and a research economist for NAIOP, updated his outlook on demand for industrial, office and retail commercial real estate in light the coronavirus.

“CRE was faced with technological disruption before this crisis,” Savage said. “This crisis is more of a natural disaster than a financial crisis; the significance of which is that on the other side of it, the fundamentals will be the same, they have just been moved further along the continuum.” These trends, Savage said, affect all sectors:

Positive outlook for the industrial sector

Prior to the crisis, the NAIOP Research Foundation had revised its projections for industrial demand upward in a report entitled, The NAIOP Industrial Space Demand Forecast. It had forecast decreased demand into mid-2021 due to a lagging supply of available space and economic uncertainty but a fairly quick rebound to robust levels similar to those seen in early 2019.Those levels may now be reached sooner, as people have come to rely on delivery-based goods for more everyday living items.“These wide-ranging economic factors all support increased demand for industrial real estate. The long-term economic effects of the

coronavirus are of course unknown, but we see a strong underpinning of the global economy, including low interest rates, the ever-increasing amount of online commerce and a demand for faster delivery of goods,” said Thomas J. Bisacquino, President and CEO of NAIOP.“Industrial real estate is at the epicenter of automation and e-commerce distribution and stands to benefit from this transformation we are going through,” Savage said.

Office spaces to shift focus

The office sector will be driven more quickly by changing work patterns that will favor decentralized work, co-working and short term leases, even in Class A spaces.

Recovery for the hospitality industry

While hospitality has been significantly negatively impacted, early signs are that it will bounce back quickly.

Despite the recent upheavals, the need for tactical positioning in industry will expand in the era to come.

Focus on being closer to where people live

The current shifts in behaviour caused by coronavirus mean people are less willing to commute to work or travel to shop, meet or interact. Positioning will become increasingly critical to retaining client loyalty and ensuring continued custom from your client base. Businesses located in remote areas will need to transform their business models to incorporate eCommerce and other distance revenue streams, as they are likely to struggle to draw people from urban areas as they did previously.

Market disruption leads to people relocating

With the pressures of COVID-19 on the market, people will be downsizing, moving to new cities and towns for employment. With the movement comes opportunities for relocation services, self storage and

a host of other business concepts aimed at making people’s journeys simpler and more manageable.

Remote working

Possibly the greatest transformation between people and work since the previous industrial evolution is currently underway. Microsoft estimates that five years worth of automation progress has occurred in the first quarter of 2020 alone. Assisting the workforce to work more easily from where they live, and employers in managing the process, is fast becoming a major industry.

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