Tag Archives: COVID-19

7 Trends Influencing Commercial Real Estate in 2021

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Savvy real estate investors are constantly gathering and analyzing market trends to make wise business predictions. Trend analysis provides data-based evidence to help inform your strategic decisions for a competitive edge and prosperity in the commercial real estate market.

Most businesses experienced a rough time through 2020 as COVID-19 disrupted almost all sectors of the economy. The pandemic has a significant influence on today’s commercial real estate market. However, some of the changes we are seeing began several years back.

We’ll look at the latest trends in commercial real estate and suggest some investment opportunities you can seize.

7 Trends Influencing Commercial Real Estate in 2021

If you’re looking to invest in commercial real estate this year, below are some vital things to know.

Interest Rates are Low in 2021

The Federal Reserve will maintain low short-term interest rates throughout 2021. According to officials, interest rates will remain near zero until at least 2023. At least for now, no major bank has expressed an intention to hike interest rates in the United States.

This deliberate action will hasten the country’s economic recovery and encourage commercial borrowers to continue investing. Consider borrowing at this time to purchase commercial real estate to enjoy low annual percentage rates.

Distressed Property Sales and Rent

Most people thought that 2021 would be better economically than 2020, but the year hasn’t been promising for everyone. If you look at history, you’ll realize that recovery from a recession takes time.

As such, borrowers, especially those in the hardest-hit groups, will have a hard time getting back to business. For instance, the hotel industry will remain unattractive for the best part of the year as people continue social distancing. It will reduce the demand for such business premises.

Additionally, the lowest social-economic groups will struggle to recover, forcing some of them to close down. Large retailers like Walmart will have better chances of survival than small shops and local restaurants.

This disparity has spilled over to the commercial real estate market. Currently, there are many vacant mom-and-pop shops, leading to a downward trend in rent prices.

Plenty of Cheap Office Space

COVID-19 contributed to an influx of teleworkers as companies encouraged employees to work from home. A 2020 survey by Gartner revealed that a whopping 74 percent of CFOs were planning to shift some workers to remote work permanently.

Further, employees seem to be happier and more engaged since they started working from home. According to a recent study, 70 percent of workers reported more job satisfaction when working remotely.

With employees opting to work from home, there has been an increase in unutilized office spaces in many organizations. CoStar Group found that corporates added a record 42 million square feet of office space in the commercial real estate market within the second and third quarters of 2020.

Many corporate tenants are subletting their unused office spaces to reduce wastage. Consequently, office spaces have become readily available and relatively cheaper than in the past. It may not be the best time for investors to engage in the business.

Homeowners Want the Suburbs

COVID-19 has also accelerated the real estate market in the suburbs. One reason is the adoption of remote workforces by many organizations.

Traditionally, workers chose condos near their office buildings in cities to avoid long commutes. With the flexibility of working from home, employees are leaving smaller city dwellings for more spacious homes in the suburbs.

Pandemic-related lockdowns have also contributed to the rising demand for suburban homes. Families are finding downtown apartments congested and unsafe since they are spending most of their time indoors. They want more space and affordable amenities for their loved ones.

Besides being relatively larger and cheaper, suburban homes offer more outdoor space. Homeowners have also lost interest in some city attractions like malls and restaurants because they are either closed or running at partial capacity. 

Affordable Housing Still a Concern

Millions of Americans can’t afford safe housing. According to the latest census data, the United States had about 580,466 homeless people in 2020. While homelessness was steadily declining since 2007, the numbers started rising again from 2019.

The condition may have worsened due to the coronavirus pandemic. According to the National Apartment Association, owners of smaller and Class C apartments have reported increasing delinquencies in their properties over the COVID-19 period.

Overall, many low-income earners are in dire need of better housing. You can consider investing in affordable dwellings for the community.

Endless Commercial Real Estate Opportunities in Sustainable Building

Many nations consider sustainability integral in propelling the planet toward green recovery sustainable wealth. According to the IEA’s report on world energy investment, the world injected $240 billion into energy efficiency efforts in transport, buildings, and industry sectors in 2019.

Sustainable building will intensify in 2021 and the years to come. Experts predict that the United States green building market will reach $99.8 billion by 2023.

Socially responsible investors can consider venturing into the green building market. If you don’t know where to start, try the education sector. It owns 17.2% of green buildings in the country.

SMEs to Present Commercial Real Estate Investment Opportunities

While some organizations are busy cementing work-at-home formulas, others want their employees back to the office the moment it’s safe. Examples are businesses that thrive on in-house operations. 

The government is also keen to see small and medium-sized businesses back on their feet. The House passed the American Rescue Plan in March 2021, a coronavirus relief law that will benefit small businesses with $1.9 trillion. 

Some SMEs might utilize the stimulus to expand their business premises. Industrial sectors like life sciences, warehouse operations, and network infrastructure have been doing well despite the pandemic.

If you’re a commercial real estate investor, stay hawk-eyed on businesses that might need new buildings and grab the opportunity. Consider leasing office space toward the end of the year or work with a real estate investment trust (REIT) for long-term gains.

New Commercial Real Estate Business Ideas

The economic disruption witnessed in 2020 introduced innovative real estate solutions that caught many by surprise. Let’s highlight a few business opportunities that real estate investors can implement this year.

Commercial PropTech

Also known as PropTech, property technology focuses on digital innovations that ease asset management and increase efficiency in properties. As a real estate investor, you can use PropTech to research, purchase, sell, and manage real estate.

A warmly lit dining room with four chairs around a wooden table and a digital overlay smart home concept with a house icon surrounded by home automation icons
There are near endless applications of property technology.

You can also upgrade buildings to make them more marketable and comfortable for users. For instance, a smart thermostat can learn your room temperature preferences and adjust the heat automatically when you arrive in the office.

On the other hand, smart locks allow you to lock your building and walk around without a key. You don’t need to worry about losing your keys.

If you rent vacation homes, keyless locks allow smooth check-in for guests. Give your clients a unique code to unlock doors and change it as soon as they check out.

Explore the latest property technology and adopt what makes your life easier.

Last-Mile Distribution Outlets

Last-mile distribution hubs existed before, but they became more popular than ever amid the COVID-19 due to increased online shopping. 

Essentially, these are the last stop points for goods before merchants can ship them to the buyers’ homes and offices. The buildings are usually in strategic areas in populous cities like Jackson for a broader customer reach.

Many merchants, including large-scale retailers, are converting their stores into last-mile distribution centers. You can acquire brick-and-mortar stores and retrofit them to become last-mile product distribution hubs.

Ghost Kitchens

If you haven’t heard about ghost kitchens, these are catering kitchens designed to fulfill food delivery orders. They are a new concept that commercial real estate investors can implement this year. How do they work?

A catering team rents a kitchen space from a landlord, preferably in a densely populated area. They list their brand on an online platform and start getting orders. From there, they prepare meals and deliver them to customers.

Micro-Unit Apartments

A micro-unit is a small suite, usually a single room unit designed to provide the bare essentials of an apartment. They often come with a living-cum-bedroom area, a kitchenette, and a small bathroom.

The houses are ideal for low-income individuals looking for a safe dwelling. Due to the compact size, micro-units are cheaper for tenants than ordinary, single-family units. The owner can also charge a relatively high price per square foot.

You can develop micro-units as single-room apartments or convenient guest rooms for businesses such as restaurants.

Multi-Family Conversions

Another real estate trend an investor can consider is the fabrication of business buildings into multi-family rental complexes. It has become increasingly accepted due to the rising construction costs.

Target large properties like hotels, factories, malls, and office buildings that have closed down. The advantage of such facilities is that they are often in strategic areas for homes. Additionally, you can modify them at a considerably lower cost than erecting a new construction.

Find Commercial Real Estate Help in Jackson, MS

Are you a commercial real estate investor in Jackson, MS looking for help with property acquisition, sale, and management?

Speed Commercial Real Estate is a seasoned property sales and management company that has served Jackson, MS area for over 17 years. We can devise a well-thought-out marketing and leasing plan for your property to maximize profits and give you an edge over competitors.

Contact us for commercial real estate help tailored to your needs.

How a Post-COVID Economy Affects the Commercial Real Estate Market

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Commercial real estate (CRE) is an investment. And like most other long term investments, CRE investors will experience exuberant heights and terrifying lows over a long enough time. The plunging economy brought about by the COVID-19 pandemic, coupled with civil unrest and political concerns of a historic election year in the US, is an example of one such valley. 

But all is not lost. 

While closing businesses and reducing tenancy is a hard strike against our bottom lines and limits our cash on hand, it offers unique opportunities for cheap growth for savvy investors. Opportunities might manifest as extremely affordable property available on the commercial real estate market. Or, this might be an ideal time to make building upgrades and increase the value of your CRE, as contractors are bidding quite competitively for your business. 

Today, we’ll explain how the invisible hand of the market affects commercial real estate values, with a particular look at our local market in Jackson, MS. We’ll start with a light review of how COVID-19 affected business overall. We know it’s still fresh in your mind, so we won’t bore you with repeat information. Instead, we’ll focus on the most significant changes and some noteworthy details.

As always, if you’d like to know more about commercial real estate in Jackson, contact us. 

How Quickly COVID-19 Hammered Businesses Around the Globe

In December 2019, scientists identified an outbreak of a new strain of coronavirus in Wuhan, Hubei, China.

  • It rapidly grew from regional outbreak to epidemic, and was recognized as a pandemic by the World Health Organization (WHO) in March 2020.
  • The pandemic led to socioeconomic disruption on a global scale, as infection numbers and deaths ballooned.
  • Drastic action was taken to suppress the outbreak.
  • Here in the US, many states issued shutdown orders, social distancing requirements, quarantines, and isolation. 

It was this forced shutdown that struck our economy hardest. And while it’s difficult to qualify (annual reports aren’t available yet), it seems like the most significant downturn for commercial real estate occurred during the summer. This makes sense, as an estimated 20 million Americans had lost their jobs by April, per BusinessInsider.com. Only a month had passed since COVID-19 had been declared a pandemic.

By summer, many CRE investors were feeling the slump. Ron Derven of The Commercial Real Estate Development Association (NAIOP) said “The pandemic directly impacts the demand for space through quarantines, social distancing, shutdowns, supply chain disruptions, employment loss and a shattering of consumer confidence…”

Industries Hit Hard by COVID-19

The industries hit hardest in the US were:

  • Travel, hospitality and leisure
  • Personal care services, like salons and spas
  • Full-service restaurants

And many other sectors felt the impact negatively — ranging from dentists to movie theaters.

retail-closed-sign-handing-on-glass-door

However, a few industries were able to capitalize on the pandemic. Warehousing, logistics and transportation companies did well, and online retailers continue to make a killing. Online entertainment, forums, social media, and games have experienced tremendous leaps in business since the pandemic began — to the tune of a 71% increase in online ordering.

So, while commercial real estate for day spas and restaurants sits unused, warehouse space and manufacturing operations are booming.

Now that we’ve cycled through the highs and lows, let’s take a closer look at the invisible hand — and how it’s affecting commercial real estate prices in a post-COVID world.

The Invisible Hand of the Market

Investopedia.com says it well: “The invisible hand is a metaphor for the unseen forces that move the free market economy. Through individual self-interest and freedom of production [and] consumption, the best interest of society, as a whole, are fulfilled.”

“Seeing” the Invisible Hand 

The invisible hand manifests as price changes that affect consumer behavior. When gas prices soar, commuters buy fuel-sipping vehicles, limit their driving, and combine trips to save gas. Suddenly bicycle sales increase and traffic is less congested.

Or, let’s imagine your favorite brand of coffee is on sale. You might be motivated to stock up your supply. If the price of your favorite coffee increases drastically, you will eventually face a point where you feel forced to say “that’s too expensive” and buy another brand. So we can feel the invisible hand at work when a product becomes too expensive or when we pay more for a product that we perceive to be better. 

The Invisible Hand at Work in Commercial Real Estate

In the realms of commercial real estate during an ordinary year, we can imagine the invisible hand affecting prospective tenants’ choices as they:

  • Negotiate price per square foot of office space for rent
  • Rush to accept “first month free” deals, or move-in specials
  • Move from one commercial location to another for the sake of upscale appearance or branding

We can also imagine commercial real estate owners hoping to lure a better grade of tenant or higher rents during a typical year. They might look into landscaping improvements, a security service, a fresh coat of paint or new architectural elements. Any time you’re adding perceived value to a commercial property to attract business, you’re attempting to sway that invisible hand. 

Looking Ahead: How a Changed Economy Affects the Commercial Real Estate Market 

Here in Jackson, salons, restaurants and retail boutiques have shuttered since the pandemic. Once-coveted restaurant space is now overabundant. However, when social restrictions and shutdown orders finally lift for good, there will be a leasing rush as newly unemployed individuals become entrepreneurs in the food industry.

Online retailing, on the other hand, has blown up! It won’t stay that way forever, though. After the 2020 holiday shopping rush, we suspect a significant slump in online sales. We believe that the American consumer will finally have had enough come 2021.

Here are a few more post-COVID CRE notes you should know:

  • Warehousing space is at a premium. So are small office spaces and shared office space.
  • Major employers who pay a homebound workforce are pleasantly surprised by their lower overhead costs. They will be looking for more shared office space opportunities than large office spaces. 
  • We can expect to see a reduced market for massive conference rooms in the wake of social distancing. It might be time to split up large meeting rooms into smaller, socially distant, individually affordable offices for now. 

Is Commercial Real Estate a Good Investment After COVID-19?

Absolutely!

Just know that every investment comes with a certain amount of risk. Commercial real estate is so attractive because it has a history as a steady earner and insurable against many loss types.

We know that 2020 has been an unprecedented year in the world of CRE, but there’s still more to come. The Speed Commercial Real Estate staff would encourage you to take advantage of cheap commercial property prices and eager contractors to build your CRE empire. Get in touch if you’d like to learn more about commercial real estate in Jackson, MS, as an investment for your future. 

Related Reading & Resources:

Fraser Federal Reserve: Timeline of Events Related to the COVID-19 Pandemic

Globest.com: The Consequences of Making Real Estate a Commodity

Re-Opening Your Business During COVID-19

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The long-awaited ease on lockdowns is upon us, with most businesses getting the green light to reopen. It certainly comes with much-anticipated relief as business owners gear up to get back to their sources of income. But even with the lift on restrictions, it is still not a normal state of affairs. Re-opening your business during COVID-19 comes with its own set of ups and downs. You still need to maintain vigilance and keep your employees’ and customers’ wellbeing first. If you are currently facing challenges on where to start, let this guide act as a starting point as you reopen your business.

Review Industry Guidelines and Specifications on COVID-19

Before deciding when and how fast to re-open your businesses, you first need to consider where your business falls within the newly issued re-opening standards. Federal and state regulations dictate that each company needs to adhere to given specifications on their area of operation. For instance, some businesses will have to cut down on the number of staff and customers during working hours. If you operate sensitive businesses such as restaurants, you may also have to get regular screening for your workers.

Paying attention to your immediate business is not enough and as such, you will need to look into your business allies and the guidelines surrounding them. Check that your business connections, such as vendors and landlords, also have a go-ahead before initiating business deals. Some institutions require health certifications, so keep that in mind to stay clear of any legal troubles. Current restrictions are bound to change as time goes by, meaning regularly checking for updates will serve you well.

Workplace Cleaning and Disinfecting

Just like personal hygiene is called for in fighting the pandemic, reopening your business during COVID-19 also calls for enhanced cleaning measures. This means cleaning and disinfecting all business surfaces and equipment while adhering to the EPA’s standards. If you have any equipment that may cause challenges during the cleaning process, now is the time to store them away safely. Such surfaces may also be breeding grounds for COVID-19 due to contact once you reopen, so it may be best to keep them in their storage areas. These practices will come in handy before reopening your business, but you certainly need to have scheduled cleaning and disinfection visits during your operations.

Prep for Daily COVID-19 Safety Measures

hand-holding-no-touch-thermometer-for-COVID-19-detection

Businesses have undergone massive losses due to their closure, which is still a likely scenario unless owners take action. To reap benefits from reopening your business, you need to prepare your workplace with new safety measures. These include:

  1. Setting up check stations. These will facilitate proper checks to ascertain that your employees and visitors have appropriate personal protective equipment such as masks. The checkpoints can also act as screening points for elevated temperature checks for any incoming personnel.
  2. Protective screens at high interaction areas. If your business operates in areas where employee-customer interactions are more likely, you will need to introduce protective screens.
  3. Organize and space out your workstations to help employees maintain social distance on your business premises. If, on the other hand, you have limited space, consider accommodating teleworking plans, or have your employees working in shifts.
  4. Consider marking spots in communal areas such as elevators where employees and customers should stand. You can also extend this to queuing areas to allow customers to have proper guidance.

Realign Your Communication Tools

Communication has been an essential tool for businesses, but you need to improve it with the pandemic. Re-opening your business post-COVID-19 means being on the pulse of everything that is happening at your workplace. Establish clear communication lines with your employees before you get back to business to allow for a smooth transition. It can include appointing an employee beforehand to handle all employee and customer queries. These may consist of having information on matters such as new safety guidelines, changes in work hours, and work refusals. Depending on your business needs, the employee can have a designated mode of communication such as emailing, real-time responses on your website, or answering telephone calls.

Your customers can also benefit from well laid-out procedures such as clear signage. These can act as information tools for them to learn about the new safety measures.

Check Your Operational Needs

Now that you have the COVID-19 safety measures in place, it is time to look at your daily operational needs. Are you still in contact with your suppliers and vendors? Re-opening business post-COVID-19 will require you to re-establish your networks. Look into your supply chains as well as your inventory needs. You certainly do not want to have any shortages during your first day of work. Confirm that your vendors are still in operation and, if not, get new contacts and verify their work. 

Liquidity and cash flow can also present unforeseen challenges while reopening your business during COVID-19. Do you have enough finance to back you up for the next few months should another lockdown happen? Get your financial records in order and establish how to cut down costs, such as working with suppliers who currently have discounts.

Check Your Premises’ Safety Guidelines

Ensuring your premises’ safety is also a crucial step for getting back to business. Check for any damage that may have occurred during your lockdown. It may be simple issues such as water leaks that could threaten the structure of your building. Consider other often-forgotten factors, such as pest invasion and whether your ventilation and drainage systems are working correctly. Lastly, do not forget to countercheck your fire protection tools.

Flexibility in Facing COVID-19

Let’s face it, some measures mentioned above may feel excessive at first, but they will come in handy in maintaining safety at your workplace. Your employees and customers need to feel protected, so set up practices that will safeguard their health. Normalcy will soon return to the workplace, but before that happens, flexibility is called for in mitigating the current times. Adjust your needs as time goes by to allow your business to succeed.