Pandemic has accelerated huge changes in commercial real estate
COHOES – Living in the past is something commercial real estate managers cannot afford.
With the coronavirus pandemic raging in upstate New York in the hope that a large part of the population can be vaccinated against COVID-19 within a few months, the commercial real estate market is undergoing billing.
Who would have thought a year ago that Crossgates Mall would sue well-known renters like Gap and Lord & Taylor for unpaid rent?
Or that landlord Andrew Cuomo would still prevent landlords from evicting their commercial tenants?
What we have learned is that in the age of the novel coronavirus, anything is possible.
And when it comes to commercial real estate, the idea of opening up the sector to new opportunities moves the industry today.
Extensive changes are an opportunity
Just ask Todd Curley.
Curley, a partner of The Prime Cos. In Cohoes, says the pandemic didn’t destroy his industry.
Rather, he said it had only accelerated the profound changes that had been going on for some time, due to technological advances that were affecting all segments of society.
The key to commercial real estate business survival has been diversifying successful businesses into a variety of sectors, including not just retail and restaurants, but also office and industrial space, as the dynamics of the market have shifted over the public health crisis .
The most dramatic change has been in retail, as non-essential stores and malls were closed by the state almost immediately when the pandemic hit the state in early 2020.
Although malls and other non-essential businesses like department stores and others are now open, much of the damage has already been done when people flocked to Amazon, Walmart, and other online retailers for their daily and vacation purchases. Observers believe they are unlikely to be returning to the mall.
“The pandemic forced consumers to shop online faster than planned,” Curley said.
That’s not a bad thing, though, especially for those in the real estate industry who anticipated the trends.
According to Curley, the realities of the pandemic have been fast-forwarding to society that has had a conflicting relationship with traditional consumerism for some time, even with the technological rush that has promised food, travel experiences, and on-demand shopping from the touch of your phone.
“As with any economic disruption, there are winners and losers,” said Curley. “While the coronavirus outbreak halted the hotel industry with widespread hotel and restaurant cancellations, it drove demand for industrial space primarily to support distribution and storage.”
And also drive-through restaurants.
Because of this, Prime Cos. Ensured his new 3.36 acre multipurpose project on Van Schaick Island in Cohoes called Delaware will have one on site. The development will include nearly 100 mixed income residential and commercial units, which will include a yet-to-be-determined drive-through tenant such as a café or restaurant. The residential area under construction will be completed this summer and marketing of the separate commercial and retail building to tenants will begin shortly.
“Some retailers – drive-thru in particular – stayed strong during the pandemic,” Curley said.
The changing office space market
While commercial residential real estate has remained stronger than most sectors, the commercial office space market is changing with so many employers requiring employees to work from home and those who work in offices closer to home Densely populated settings must be away from their colleagues.
Curley and others say this was the biggest change in their business.
“The sudden shift in some sectors to homework has created new expectations for flexibility,” said Curley. “This has the biggest impact on the office space as some companies are downsizing their office space and giving employees the ability to work remotely, while other companies looking to stay in traditional office furnishings may have to expand their space requirements to individuals larger workspaces (for social distancing ). “
Employee expectations are key to this change in the commercial office space market, says Seth Rosenblum, CEO of Rosenblum Cos. In Guilderland.
Rosenblum said companies simply cannot bring their employees back to the same old workplace. There are important safety measures in place to encourage social distancing, and workers can be confident that they will be working from home most of the time. People won’t want to go back to the old days.
However, Rosenblum emphasized that training takes place in company offices and that the culture is cultivated and created. Offices must therefore continue to focus on these needs, even after the majority of the population has been vaccinated and people feel safe going back to work.
“The office is no longer where people need to be,” said Rosenblum. “It is (will be) where you want to be.”
What does that mean? This means businesses need less space, but also flexible space that they can expand or contract as needed, depending on who is in the office.
Rosenblum says when the pandemic broke out, people thought that was the end of the collaboration. However, Rosenblum believes that co-working spaces, especially those geared towards businesses looking for flexibility, will be popular to help businesses transition out of pandemic lockdowns.
However, this concept is based on the idea that people expect to work as much from home as they can or want. In many cases, productivity has increased as employees can better balance work and personal life.
“They (both companies and employees) have seen the advantage of being able to work from anywhere,” said Rosenblum.
Diversification means survival
The key to survival for many has been diversification into many different commercial real estate sectors. Dallas-based CBRE, which has local offices and is the world’s largest commercial real estate and investment firm, announced that its revenues fell nearly 5% in the third quarter of 2020, despite earnings falling nearly 10% since the company had tried to diversify in recent years.
“Our third quarter performance underscores the progress CBRE has made in building a more resilient business since the last downturn more than a decade ago,” said Bob Sulentic, CEO of CBRE, in a statement in late October. “The resilient aspects of our business, as well as our efforts to quickly adjust spending to lower market demand, help us weather the sharp decline in property leasing and sales caused by Covid.”
The commercial real estate companies involved in logistics and package deliveries were the biggest winners during the pandemic.
“Right now, commercial rentals are the best for distributors like Amazon and FedEx,” said Wesley Shernow of Copper Club Management, an Albany real estate company. “Commercial markets can be very stable during the pandemic, even more so than residential real estate – but that depends on who you’re renting to.”
That said, if you have a company like Amazon or another parcel delivery company or online retailer that is doing well as a tenant, you’re in luck.
“For example, if you rent from Amazon, you know the rental will be on time,” Shernow said. “The company is thriving.”
Despite all the bad news at the national level regarding unemployment and COVID-19 infections and deaths, many in the capital region’s business community are hoping for the commercial property market.
Todd Shimkus, president of the Saratoga County Chamber of Commerce, “reopened” a ribbon editing for the Bow TieCinema in Saratoga Springs in December after it closed for months during initial pandemic closings.
“I think our local economy and our local businesses have shown a lot of resilience so far,” said Shimkus. “We cut nearly 50 tape cuts during the pandemic. This shows that people are still taking risks and investing in our local Saratoga County economy. The federal incentive will help. It will help vaccinate more people. We will get some commercial space.” available. ” When we get out of the pandemic, I am confident that it will only be temporary. If I see an open space here, I see an opportunity. I suspect that I am not alone. “