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covid and commercial real estate
23 Jul
2020

How Will COVID Impact Commercial Real Estate?

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With the increase in problems dealing with other people and keeping distance from other people, there are many changes that could be coming to the commercial real estate market.  Especially those in smaller markets that may still be stuck in their antiquated ways of doing business.  This “new normal” looks as though it is here to stay a little longer given that a second wave of closures may be coming during the writing of this article.  If that is so, we are going to go into a little more detail on where we think commercial real estate may be heading. 

To Go Online or Not?

We have seen in the residential space there has been a larger push to move their showings online by doing things like virtual tours.  This could be something that commercial tenants are now going to be seeing because there are a lot of people who are not seeing properties at all due to the social distancing and then there are also a lot of people who would just prefer to see the properties from the comfort of their own homes.  I do not see this completely replacing the in-face showing because people will still want to see and take a look at the physical unit they will be leasing, however, I do think that this can decrease in person showings because the people who will want to see the space are going to be more qualified than might have been before. 

How Efficient Was The Commercial Real Estate Process To Begin With?

In most cases, I have known commercial real estate agents to be lagging behind in technology and more set in their ways. This means that a lot of commercial brokers are not as savvy as their residential counterparts which is surprising given the commissions and Buyers are much more sophisticated.  Because of COVID and again because of the social distancing aspect, I think that we will start to see more efficiency in the commercial real estate sector given that people are more and more not willing to meet in person or meeting in person is becoming more inefficient. 

Guide To Investing In Commercial Real Estate

Is This A Good Real Estate Deal To Purchase?

Some things I don’t think will change.  When a commercial real estate transaction comes along, there will still need to be underwriting done.  That underwriting was done previously given the guidelines that many of the large institutions were looking for, but as we have seen, those large institutions are now tightening up their belts on their due diligence and underwriting and that means that underwriting standards are more likely than not going to start getting more strict.  Not to mention, who knows if the Buyers are going to be seeing the properties in person as much and if they don’t that means the responsibility of due diligence lies even more so on the bank. 

Does The World Still Need As Much Restaurant Space?

Restaurants are now a thing of the past in this COVID 19 world.  If this world continues much longer, we will see a lot of restaurants go out of business, including the ones that have already gone out of business.  This means that all of these retail locations that people used to travel to on a regular basis are now not being trafficked and not driving rent dollars for the Landlords.  So what is a Landlord to do?  Do they just sit on this vacant space and hope that COVID will end and they will get a new Tenant who will gladly pay their high rents in hopes of people going out to eat again at greatly reduced total occupancy rates, or will they start looking to re-purpose these spaces into spaces that are more “normal” in a post-COVID 19 world?  My vote is for the latter.  With cases rising, and no end in sight for this virus, it seems as though we might be looking at an actual “new normal” where people do not go out just to go out, but they thoughtfully visit the places they enjoy and avoid those that may not be necessary.  That being said, there are new record amounts of cases and people going out in droves as compared to the first wave, so logic may not be my strong suit here, or maybe in the end it will come back around and bite us.  We still have yet to see. 

My guess is that we will be seeing a lot of commercial spaces re-purposing for more higher traffic businesses in this new world.


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Synergy Real Estate & Property Management
Sunny Advani
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sunny@re-synergy.com
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