One of the biggest concerns for real estate during the pandemic has been vacancy rates. Residential real estate has experienced noticeable growth thanks to remote work and lockdown guidelines. Despite financial troubles from tenants, demand is still high.
The same reasons why residential real estate has been doing fine are also responsible for its commercial counterpart's troubles. In these times, innovation becomes more than an advantage. It's vital for survival.
That's why we'll go through how different companies have curbed the difficulties, as well as a few tips to help you do the same if you're struggling.
How the Pandemic Has Influenced Commercial Real Estate
As the Times Union explains, you can't stay in the past if you want commercial real estate to survive. The current landscape is experiencing situations no one could envision before, and the pandemic has demonstrated that nothing is impossible.
The article points out several intriguing cases of how innovation has been synonymous with survival these days.
Opportunity from Change
Firms have had to adapt to new sectors, from retail to office and more. The crisis has tipped the entire market's dynamic. The retail industry saw the biggest hit, with malls and stores closing during lockdowns.
Traditional markets, like hospitality, were clear losers. However, industries like storage and industrial real estate have flourished thanks to the demand for more storage and distribution support.
Office Space During the Crisis
Office space has definitely been one of the largest casualties of the pandemic. Remote work will likely remain as well, thus decreasing demand for this sector. Sure, offices won't disappear, but many businesses will need them less in the future.
We need to consider that work training and culture comes from the offices. That means office spaces will experience a re-direction towards these needs. Additionally, many people will prefer offices over remote work, thus breeding the need for space flexibility.
Survival from Diversification
Even the largest CRE firms have endured massive losses. On the other hand, companies in the logistics market, including deliveries, have benefited during the pandemic. Therefore, knowing the right tenants could boost your income, like residential real estate.
The key lies in identifying which sectors have experienced growth during the pandemic. You want to market your spaces to these companies. Luckily, upcoming vaccination availability will only increase the number of recovering markets.
COVID-19 and Its Implications
On the other hand, Deloitte has a detailed report about COVID-19's impact on commercial real estate. It's a comprehensive report, with evolution as its central thesis.
However, we'll focus on the virus's implications on different commercial real estate sectors. It also offers excellent insight into how companies could recover and flourish amid these dire times.
Specialized Sector Changes
The real damage to real estate comes from its tenants. If they're struggling because of the pandemic, property managers will follow suit.
Therefore, the article details several CRE subsectors and how the pandemic has influenced them.
REITs
REITs have experienced diverse impacts depending on the type of property. Data centers have grown during the pandemic, yet hotels and retail spaces plummeted amid regulations.
Naturally, any property type that depends on foot-traffic has been a loser during the pandemic. The same is true for property tours thanks to social distancing, thus slowing down deals.
Building Development
Homebuilders and development companies have a promising future in many sectors. However, they're still suffering from project delays and lower cash flow.
Countless firms have experienced entire project suspensions during the crisis. Those still active still need to endure strict guidelines, thus indirectly delaying them.
Private Equities
Luckily, there haven't been immediate declines for these investments because they're not public. According to Deloitte, most investors focus on aiding portfolio firms.
We do need to note that they might change their allocations to curb risks while playing towards opportunities. Therefore, resilient investments, like data centers, might enjoy more attention.
Proptech
Like REITs, Proptech fare differently depending on their services. For instance, coworking spaces have suffered because of social distancing.
On the other hand, Proptech focusing on digital services, like property management software providers, are different stories. Many actually help companies overcome the pandemic's challenges, thus profiting considerably.
Experts' Steps for Overcoming Coronavirus
The article also offers excellent insight into how companies have managed to survive during the pandemic. While it's a significant list, we'll summarize the most important suggestions.
Response
Immediately addressing short-term complications is vital for survival. Liquidity management is often the first step taken. It includes addressing dividend rates and payments, refinancing, and leveraging credit.
Tenant support is also vital during the pandemic while optimizing operations. Interestingly, many property owners have repurposed their properties into quarantine centers. That includes accommodating healthcare personnel as well. Other options include digital adoption for payments and requests and adjusting rents.
Finally, technological implementation becomes vital during COVID-19. Using modern management software (like Yardi, MRI Software & Procore) enables your resources to work remotely, and the same is true for managing your tenants.
Recovery
After taking proper response protocols, recovery is the next process. It's not passive, however. Companies need to tackle this phase with a strong strategy. The first step is to prepare the spaces and personnel for reopening.
Companies need to consider how unoccupied properties can deteriorate and how to resolve these issues. Successful reopening requires a comprehensive approach, and you can't take it lightly.
Even after reopening, many safety practices will remain popular after the pandemic dies out. Remote work should be encouraged during reopening, and it should remain an option after things go back to normal. Technology implementation and data security are still going to drive innovation as well. Many companies experiment with Robotic Process Automation (UiPath) and others technology to reduce errors and more control over their property operations.
The Effects of Empty Retail Space
Retail stores have been emptier than ever. The fact that regulations demand to avoid crowding does little to alleviate the situation.
Real Estate Express has a useful article about the issue. It details how empty retail spaces have impacted the industry, as well as a few helpful resources.
Current Developments for Empty Chains
Even huge chains, like Kmart, have faced serious problems. For instance, Sears recently filed for bankruptcy. Most likely, larger spaces will split into smaller rental options for flourishing companies.
Perspectives buyers for these spaces include many companies in the growth-industries as mentioned above. Prominent names include Amazon and U-Haul.
Recommendations for Empty Space Monetization
Now, empty space doesn't have to mean loss. When we mention property management innovation, we mean it completely. You can benefit from your unoccupied properties. You only need to figure out the right approach.
That's why resources like Storefront Magazine's monetization tips can be lifesavers. It might not sound ideal for you, but learning to think differently could make the difference between life and death (financially speaking).
Renting to Pop-Up Retail
Short-term tenants keep your properties occupied while attracting footfall. You'll need to accommodate several features for them, but chances are you already have many of them, like restrooms and Wi-Fi. Just make sure to offer a neutral space to aid their branding.
Private Events
Sure, events aren't too popular during the crisis, but as vaccination becomes more available, people will feel desperate to go out. Meeting this demand early on could provide solid returns to aid your recovery.
Marketing Tips for Vacant Properties
Finally, we want to close this article with more good news. This time, we're adding even more tips to help you make the most out of vacant spaces.
Tweak Your Biz has an entire list of marketing ideas for derelict space reuse. Now, "derelict" might sound extreme but don't worry. These recommendations are helpful for vacant properties in general.
Advertising
Window displays and blank walls make prime advertising opportunities for multiple companies. You could offer vacant spaces for them to advertise your products, although compromising your walls might be too much. However, offering your walls to non-profits could give you a good marketing boost.
Viral Marketing
Vacant urban properties are excellent for viral marketing. Companies like Nokia have made entire marketing campaigns out of projections on walls. Graffiti is a modern way to communicate your company's message while gaining popularity among younger audiences.
Virtual Shop-Fonts
Using 3D design to mimic occupied spaces with real shops is a great advertising method. These graphics imitate occupancy almost perfectly, offering excellent insight into the potential for shops renting your space.
Repurposing Office Space
You can make the most out of vacant offices by allowing other companies to repurpose them. Like we mentioned, other companies have lent their commercial properties to the healthcare sector to allocate personnel or create quarantine centers. You can also rent out portions of your property as smaller and cheaper office units.
Creating Venues
Again, the upcoming vaccines promise recovery in the future. As people feel safer, festivals, meetings, and other live events will become extremely popular. You can offer vacant spaces for that while you find tenants who have recovered from the crisis.
Storage
During the pandemic, storage facilities have experienced some of the most significant demand in the industry. You can offer your properties as storage units with minimal accommodations for noticeable returns.