The pandemic has been called an accelerator, fueling trends that were already on track. Industrial is the prime example. The market has, in many ways, been a beneficiary of the pandemic. On the other hand, office and retail assets were already set for major changes, and now those changes are hitting harder and faster than anyone expected.
“Office and retail are two sectors whose challenges were really brought to the surface by the health crisis, and both point to new opportunities for redeveloping, repurposing and reinvesting real estate assets to meet evolving demand,” Dianne Crocker, principal analyst for LightBox, tells GlobeSt.com.
Retail was already fighting against the rise of ecommerce. Now, ecommerce is expanding even more rapidly than ever before while retailers are left navigating health and safety restrictions to keep shoppers safe. “Prior to COVID-19, the retail sector’s struggle against e-commerce was well told,” says Crocker. “Today, not only have the owners of “non-essential” stores had to cope with extended closures, but an even broader swath of the population now routinely shops online, making the environment for brick and mortar stores that much more challenging.”
Retailers are going to have to adapt rapidly to stay in business. “It’s going to be survival of the fittest. Some stores will join the others that have already shut their doors, while others will get creative in giving consumers a reason to come to their stores,” explains Crocker. “As a result, there will be opportunities for closed stores to get repurposed into new uses for in-demand services like medical facilities, housing or distribution centers. Others will be reinvented into more experiential shopping spaces.”
Office is in a similar situation. In the last cycle, companies have been rightsizing and reassessing workplace strategy. “Prior to March, the office sector in many metros, like New York City, was already suffering from an excess of office space,” says Crocker. “Today, after managing a work-from-home workforce for many months, there’s not a CEO out there who’s not considering flexible work options and a reduction in their office space footprint post-COVID—with the exception of large tech firms like Google.”
Companies are almost certainly going to adjust how employees work. “Many will realize they don’t need 100% of their employee base in the office full time. Some may reduce their downturn headquarters in favor of suburban office space that employees may be more comfortable commuting to,” says Crocker. “As businesses rethink their need for office space, we will see demand for the design of flexible workspaces that accommodate new pandemic-related protocols and a trend toward smaller spaces outside of central business districts.”