After the pandemic-related turbulence of 2020, commercial real estate brokers are hesitant to place bets on what will happen in 2021. But the industry saw trends in Q4 that will likely shape the first few months of the new year.
While the uncertainty surrounding the market is not going anywhere any time soon, increased activity in select sectors paired with the good news of the COVID-19 vaccine rollout are offering some cause for optimism. Getting past the challenges of 2020 will take time, however, and we’re still in the midst of a full accounting of the coronavirus pandemic’s effects on business and society on a macro level.
Bisnow spoke to CORFAC International members in a variety of real estate subsectors in markets across the country to get their perspective on the current state and future of the industry.
“The uncertainty of government restrictions was, by far, the greatest challenge for retail tenants and buyers, especially in the restaurant and hospitality industries,” said Joe Latina, principal of Patterson-Woods Commercial Properties/CORFAC International in Wilmington, Delaware, and CORFAC International president. “This was compounded by the acceleration of e-commerce, which is widening the divide between smaller local retailers and national chains.”
Latina said it isn’t all bad news: Buyer- and tenant-friendly pricing and terms have begun to create an uptick in activity, and with the disbursement of the vaccine, this increase should continue in 2021.
Retail and restaurants weren’t the only product types to bear the brunt of distancing requirements and shutdowns. Office was another category significantly impacted by pandemic-related safety measures. Over the last several months, many companies have discovered they can maintain performance with a mostly remote workforce and are in no rush to bring employees back to the office.
“Most companies that we interact with frequently have indicated that the foundation for their business is strong, and they are forecasting growth in the coming year,” said Mason L. Capitani, executive vice president and principal of L. Mason Capitani/CORFAC International in Detroit. “Unfortunately, that growth does not always correlate to taking more space as it has in past cycles.”
But Capitani said he sees it as a question of “when” not “if” companies will return to the office, especially once vaccination is widespread. For now, companies with expiring leases are looking to downsize space or for shorter term lengths.
“Although tenants are generally taking less space, there is transactional volume in the marketplace,” he said.
Rob Blundred, a broker associate at Henkle Schueler & Associates/CORFAC International in Cincinnati, said he sees real estate professionals enticing companies back to the office by re-envisioning spaces in collaboration with clients.
“The greatest opportunity is being able to learn and adapt with our tenants,” Blundred said. “No one has experienced this before, but it does allow us to be nimble and think creatively to address the challenges at hand.”
The pandemic has led to some bright spots for certain asset classes. The remote work and e-commerce trends that dampened the retail and office markets are bolstering the industrial sector.
“Flex, warehousing and logistics are still driving the activity in commercial real estate, both in terms of leasing and sales,” Latina said.
Joe Santaularia, first vice president of Bradford Commercial Real Estate Services/CORFAC International in Dallas, also singles out warehouse as a high-demand market.
“Cold storage warehouse demand will continue to grow due to consumers shifting their buying patterns from traditional grocery stores to online platforms,” he said.
Few real estate brokers will reflect fondly on 2020. Yet despite unprecedented challenges, brokers have found creative ways to support their clients in adapting to market trends, keeping their employees safe and preparing for the future. The pandemic is not yet over, but brokers are finally seeing a light at the end of the tunnel.