The coronavirus has changed all aspects of life from the way we live, work, and play. Businesses and real estate are no exception to this. Real estate is a prominent investment, more than stocks and bonds. However, with many people out of work, businesses shuttered, and economic stress, real estate is seeing a rather despondent outlook. Some of the immediate effects of COVID-19 on real estate include the shrinking demand for office space and numerous tenants canceling leases or unable to pay rent for retail mall spaces. In order for real estate to continue existing as an asset class, the industry will need to change and adapt. It is still unclear what the long term implications of the virus are, however, we can predict a few ways that real estate will change forever.
The new office
Investors have had a preference for the commercial office sector prior to the pandemic. With working from home being adopted as an integral part of many companies’ long-term strategy, the sector will be severely affected due to the reduced space requirement and lower demand for office spaces. Many office spaces taken up by startups and smaller companies are facing a variety of challenges due to funding. Health and hygiene are becoming incredibly important in the pandemic landscape, and offices need to be redesigned for the post-COVID world.
E-commerce has been disrupting the retail segment of real estate, affecting brick and mortar stores that had high fixed costs. Many tenants who were waiting for their leases to expire before moving out don’t see the benefits compared to the cost of renewing. Strip malls may take over large format, centrally air-conditioned malls. Even the demands of the retail space are likely to change, with food service, wellness, and entertainment taking preference over shopping.
Changes in consumer housing
Before the coronavirus, most technological involvement for real estate developers was online property listings. When the lockdown occurred, developers adopted revolutionary techniques such as 3D site walkthroughs including online documentation and support. Developers are now integrating virtual site tours, virtual reality online booking, chatbots, and payment platforms into their digital strategies for communication and selling. In light of the challenges that have arisen developers have taken these as an opportunity to innovate in their business.