Experts predict that return to normal will influence commercial real estate market
Commercial real estate professionals believe that industrial / flex property sales will remain strong, that the office market will “recover gently” and that the retail market will have a tough ride in the coming year.
But everything that depends on proximity.
Propinquity is “the state of being close to someone or something” that the 2020 experience of the pandemic has taken away from people.
Lynda Gibbons, President and Managing Broker at Gibbons-White Inc. in Boulder, led the discussion on commercial real estate at the BizWest 2020 Boulder Valley Real Estate Conference with the vocabulary lesson on Wednesday morning.
While working from home has disrupted business norms, including the need for offices, Gibbons said that “being together enables people to be more creative and productive,” and predicted that “the return to work will be in the coming Months as the pandemic gets under control.
Together with Gregory Glass, Senior Broker Associate at Gibbons-White, Gibbons reviewed where the Boulder trading market had been over the past year, which they had forecast for growth and stability a year ago.
To some extent, that prediction stayed true. The industrial / flex market continues to be strong as space in this sector is undersupplied and has a vacancy rate of 5%.
Office space now has a vacancy rate of 9.6%, with many companies working from home. According to Glass’ presentation, the retail sector has a 7.1% vacancy rate that could increase in the coming year.
“Downtown felt like a sci-fi movie with darkened windows,” said Glass. He cited major downtown store closings, but also some openings prior to COVID. The pandemic has brought the hospitality industry to its knees, Gibbons said, despite two hotels – the Hilton Garden Inn and the Millenium Harvest House Hotel – being rented to students by the University of Colorado Boulder. She said Boulder, and The Hill neighborhood in particular, will be remodeled in the coming months after CU built its convention center and hotel and opened a private hotel on the hill.
Retail is in a period of “reincarnation,” Gibbons said as the pandemic accelerated the transition to e-commerce sales at the expense of brick and mortar retail.
Nationwide, 20% to 25% of shopping malls are expected to be nearby by 2022, although developers are finding reuse options like indoor leisure centers, theme parks, office refurbishments, and movie sets.
While rents in Boulder and the surrounding area are higher than the national average, a trend towards short-term subletting at lower rates will put rents under pressure.
“We are in the nation’s sweet spot,” said Gibbons, with a highly skilled workforce in the area, expanding tech companies and the coveted place to help maintain commercial real estate.
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