Returning to “normal” is possible but very unlikely! This article will suggest the reasons why we now have a “New Normal” (I hate that term!). We have an unprecedented economic catastrophe placed on our economy by ourselves. When talking about Real Estate and the changes wrought by this self imposed situation we need to remember that this shutdown of the world’s economy is worldwide.
The most immediate visible and economic effect on retail properties will be on the traditional retail uses of brick and mortar spaces. I understand those stores are businesses, but the people and companies that own the property are also running a business. The public perception that disease is everywhere will just add to the misery retail businesses have been experiencing since the last recession from 2008-2017. We have experienced the contraction of the retail sector concerning physical locations as the internet mail and delivery business has grown exponentially during the last decade. We all understand the paradigm shift that can occur in all businesses. The consequences of the coronavirus will further accelerate and acerbate the loss of the physical store fronts in favor of internet sales. Now, the real estate business owner must repurpose the spaces. Governments must cooperate and allow quick changes to zoning and use requirements. The change process now in place is antiquated and cumbersome, time consuming and expensive. New construction of the retail product is already lower than in earlier times in the country’s rise to greatness as access to most available retail products became available to the masses. Repurposing will be more difficult as people get trained to stay at home. I think I read a book in High School about such a scenario. In that novel everyone stayed in their homes and got all information from TV but obviously, the computer will facilitate that lifestyle now.
The second consequence to the real estate businessperson due to the corona virus pandemic will be disruption in the Office sector. The meteoric rise in video conferencing between two people and groups up to two thousand or more is at hand. If people are able to do their jobs at home by computer, they will! What business would pay to fly an employee to London over four days with all the associated expense to have meetings about, let’s say financial matters? If everything you wish to discuss and accomplish can be done on the computer with video and document distribution, why wouldn’t you? Do the members who comprise your “Office” really need to be physically present? If the people do not need to be present at the “Office” then what is the effect on demand? I say this will be the case as time moves forward, certainly the space requirements/demand for office uses will diminish. Medical office space has been the saving grace for construction and revenue over the last decade within the office sector. That is changing as the video conferencing for medical attention snowballs. The government is allowing less stringent rules concerning medical procedures. Physician Assistants will have more authority and ability to treat patients without coming to a physical location. A video Physician, PA or Nurse Practitioner could see a full range of patients daily and never leave their homes. All necessary functions will be done on the computer including examination, recommendations, prescriptions, referrals and billing and insurance filing. Almost assuredly, the billing clerk for the doctor’s practice could always work at home and never come to an “Office” location. It is almost scary and something out of George Orwell.
The most successful real estate professionals will tell you that the most important factor in successful sales is the personal relationship. It is really hard to have relationships without personal contact. Looks, speech, knowledge, presentation and experience are all factors that both parties can glean very quickly when meeting face to face. It is also very easy to be rude or indifferent to the brokers time with no real connection. My skill has been being able to get a comfort level between the parties very quickly upon meeting. Now can we shake hands, can we greet, can we be in the same place at the same time?
Because of these factors, I see some serious changes on the horizon. Many things will turn out to be better, many things will be worse. In my opinion prices of these two sectors are headed down quickly.
Randy Krise, CCIM is the Owner/Broker for Krise Commercial Group, LLC in Fort Myers and can be reached at 239 633 8672 or firstname.lastname@example.org