We have all been experiencing the impact of the Coronavirus, COVID 19 (C19) in our personal and business lives.
What we are now beginning to consider in more depth, with more thought and with more analysis, is where we are going from here. The resolution of this issue is important in our personal lives and our business lives.
For real estate professionals and those professionals working closely with real estate practitioners, residential or commercially oriented, there are many issues that must be examined when the “doors open.” That is, when we return to work—to whatever level it might be—the questions center around the “What Now?” issues as to how business will or will not return to the prior status quo that existed, prior to C19.
On the residential side of business, questions of practice will arise for most real estate brokers. Do I “show” a house in the same manner that I did prior to C19? Do we drive around and “see” the homes? Do we rely even more than we did, prior to C19, on technology and the digital age? Most listed homes were, in one form or another, subject to viewing on “the computer” before the possible purchaser visited the house. Statistics by the National Association of Realtors (NAR) and most major real estate franchises support this position. (One study by NAR showed more than 50% of buyers find their homes on the Web. The NAR reported that in 2018, 44% of buyers first looked on the web for their possible purchase.)
With C19, all residential brokers should be aware that the web will likely be the first choice by buyers when initially considering where to search for their new home.
On the Commercial side of real estate, C19 has kept potential lessors, lessees, buyers and sellers on the sideline as to physical visits to deal with and see properties. This enforced condition, generated by C19, will eventually change. However, the question that is raised in real estate circles, be those commercial or residential settings, is to address how C19 will impact the future in dealing with real estate. Many questions arise as subsets of this broader issue, viz.:
1. When will the market adjust from C19 to the “new posture?” Are these adjustments short term or long term changes?
2. What will be the new posture? How will this impact capital needs in the real estate market?
3. What will be the resulting position on the parties dealing with real estate? Will buyers and sellers deal regularly on the web? Will the broker continue to be an important part of such negotiations? Will this be different for residential property as opposed to commercial property?
4. Will C19 change the demand for given types of space? If so, how so?
5. In the commercial sectors of real estate (Multi-housing, offices, retail, hotels, industrial, specialty properties, etc.) will C19 reduce or increase the demand for space?
6. How will the space that is in demand be influenced by C19? (Office sharing, open space, etc. will be reevaluated.)
7. What type of property will be considered for repositioning? For example, will some shopping centers be modified to allow for other uses, such as offices, service centers, residential use, etc.?
8. Will physical distancing continue, even after the major part of C19 is no longer presently at issue? If so, how will this influence the use and types of real estate in the commercial/business world?
9. Will close in quarters, residential or commercial, lose part of their attractiveness now that C19 has been experienced in a very negative setting?
10. How paramount is the issue of safety and health of employees in determining the choice, location, type, area, size and other issues when dealing with real estate choices? Is public transportation still attractive?
11. Is “force majeure” as to pandemics now a “regular” part of contracts for real estate?
12. How much has the value of real estate being negatively impacted by C19? Will this value position be recovered?
13. What behavioral aspects will be influenced by C19 and other potential pandemics? Will employees be more influenced to consider employment positions that allow for their protection from future pandemics and the like?
14. How will some types of property now be considered as investments, given C19. For example, will properties such as hospitals, care facilities, critical care units, senior facilities, and others directly impacted by the pandemic be examined in a different investment light, following C19?
15. Will investments related to business (and personal) traveling be reviewed and weighed with concern if such businesses are possibly more impacted by C19 and the tendency of some businesses to move to web-business activity as opposed to face-to-face business dealings?
16. Will the move to e commerce and dealing via the phone, computer and non-physical contact cause changes in the type of real estate in demand? If shopping for groceries becomes dominated by delivery services (Amazon and Whole Foods type) and not in person shopping, how will this affect the real estate field?
17. With many of the above positions taking place, such as web purchases and business dealings, will this result in less driving—for business or personal use? If so, what real estate will be influenced by this reduced driving? (Repair shops, gas stations, parking needs, hospitals, public transportation, etc.)
18. Do the above possible changes bode well for driver less vehicles? Will the above positions reduce the need and/or desire for personal vehicles? What other implications will arise from the above changes and the driver less vehicle?
If one were to list the various personal functions undertaken on a daily basis by many individuals, such as traveling to work, the store, taking children to school, etc., many of these functions will be affected by the pandemic recently suffered around the world from C19. In turn, real estate as a part of this enigma will also be impacted.
Looking to the myriad uses of real estate today, be it a personal dwelling or the many types of businesses that exist, all –yes, all-- of these will be moderately or hugely impacted by C19.
What is around the curve, following the reduction of concern with the current virus, will be very important to everyone, including the specific area of real estate.
The objective, now, is to determine such changes. Those that correctly discern the impact might well be the “winners” in the coming years as to real estate issues.
Dr. Mark Lee Levine,
Professor, University of Denver