Unlike past economic challenges, the human and business impact of the COVID-19 pandemic continues to unfold globally across the entire Commercial Real Estate industry. And the expansiveness, depth, and unprecedented reach of this pandemic has started impacting the CRE industry much sooner than previous documented downturns. In fact, a recent Deloitte study examined the evolving metrics that have effected the industry versus previous impact events.
Actively, there are numerous everyday impacts felt across the board. Here are a few of the biggest changes I've noticed.
1. Reassessing the portfolio for long-term risk mitigation
Companies are learning more about the risk factors and, therefore, reconsidering
their asset portfolio. Strategizing with the company’s team can aid in
strengthening the portfolio, which may result in getting rid of nonessential assets
or investing in complementary properties.
2. Managing capital and liquidity
Balance sheets and cash flows are becoming more essential in the COVID
environment. Companies are beginning to invest more in the health and safety of
the tenants and customers and make decisions on the capital capital expenditures
on existing properties.
3. Developing disaster recovery plans
When COVID-19 first hit and employees were forced to transition to remote
work, many companies were not equipped with the processes for running a
business when disaster strikes. Crisis management, developing business
continuity processes, and disaster recovery plans are now being built into
contracts and operations.
4. Optimizing Operational Costs
To reduce the spread of COVID-19 and save on operational costs, many owners
temporarily closed their properties. Similarly, landlords and property managers
have also temporarily closed the shared amenities and suspended property
management projects.
5. Modifying rents
With a decline in cash inflows, tenants and landlords are having to negotiate the
rental payments. Tenants are having to force majeure notices to their landlords,
and, as a result, landlords are foreseeing more rent relief requests in the future.
6. Use of Technology
a. Many landlords, brokers, and owners are investing in tenant engagement software
to provide them with free digital resources. For example, brokers are using Zoom
or Slack to meet with the potential tenants.
7. Remote Work
Forced to the remote work setting, the commercial real estate industry now uses
many digital platforms to communicate with their tenants. Virtual property tours
and Zoom lease signings are becoming the new-normal for many companies.
8. Reentry to physical spaces
Companies have to be cautious when transitioning back to the office and other
retail spaces because it could be the determining factor for if companies can
return in the post-COVID world.
9. Making a hygienic environment a priority
Adjusting and possibly redesigning spaces can aid in the reopening of the
commercial real estate industry. The spaces must comply with the states’
guidelines and putting the tenant preferences around hygiene and sanitization
essential.
10. Transaction Volume
Landlords of commercial properties are declining the princes of their assets. The
volume of the transactions between landlords and potential tenants are lower than
normal; however, this will aid in higher pricing because of increased investor
competition.
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