No doubt the pandemic to some extent has changed how we work, live, and interact with people. It has also influenced every other industry and the commercial real estate market is not left out. At the beginning of the pandemic, people were asked to stay at home to reduce the spread of the virus, and as a result work from home was adopted. As time went on many workers were so eager to return to their workplace but not in full capacity since the virus is still very active. There is still demand for office spaces with many people working remotely but the needs of companies have changed thanks to the pandemic.
During the pandemic there were sectors of commercial real estate that hit an all-time high with steady activity, says Tey Yong Qing. Retail spaces for pharmacies and grocery stores, warehouses for companies or businesses that are into e-commerce, and self-storage facilities are sectors that have remained active. What then should we expect in the commercial real estate market as an investor planning to invest in the real estate market.
The Commercial Real Estate is Expected to Continue Growing
The demand for commercial spaces like warehouses increased rapidly during the pandemic due to the increase in sales in e-commerce at that time. This year e-commerce will be expected to continue to fuel the demand for commercial spaces. Even before the pandemic many have been purchasing goods online due to the comfort it provides and the time it saves. But because of the stay-home orders and the fear of contracting the virus during the pandemic online shopping became more dominant. As a result, luxury shopping became a necessity in various nations around the world which is what increased the demand for logistics providers, warehouse space, and distribution centers. According to the law of demand and supply in economics when there is an increase in demand than the supply then price will increase. This means the price for rents will keep going up and the value of lands for industrial purposes will keep increasing.
What is Expected From Landlords and Developers With The High Demand for Commercial Space
The high demand for commercial space means landlords and developers don’t have to do much to get tenants that will pay higher rents to occupy their buildings. The only problem here will be competition among landlords and developers to get tenants that are ready to pay. Landlords and developers with buildings constructed with the latest technologies have a greater advantage over others with older construction but the only problem is that these types of modern buildings will be expensive to construct which will increase rents and taxes.
Pandemic has Brought Changes to Redeveloped as well as New Commercial Space
The pandemic has brought some changes to the construction and redevelopment of commercial space such as the ventilation systems of the buildings and layouts that support social distancing within the building. Recently some government agencies are now enforcing the use of green energy including other requirements in commercial development and redevelopment areas. The increased use of e-commerce has also influenced the high demand for the fast delivery of products and some warehouses are already implementing automation. All the changes and new technologies that are being implemented in buildings will only increase the cost of commercial real estate rents but it is to create an efficient and better environment. Owners of older office space will have to make some improvements or changes to keep up with the latest office space trend if they want to provide a healthy and safe environment for the occupant. Also, the demand for space is now being influenced by remote work, social distancing, shutdowns, and layoffs.
Some of the following factors are influencing commercial real estate:
Office Vacancies
The economy is bouncing back but people are still working remotely and some are relocating as companies resume back to the working environment, smaller spaces will be required and this will lead to many areas having vacancies.
Increase Demand and Less Supply
More than ever before there seems to be an increased demand for commercial properties with less supply. And many real estate investors are taking advantage of this opportunity which makes commercial properties more competitive.
The Pandemic Measures
Many companies will not be able to abide by the pandemic measures that are given if their employees are to return to the office. Considering the amount of space that will be needed to keep up with the conditions that are associated with the Covid19 measures. Some employees will even prefer to continue working remotely.
Conclusion
The pandemic has changed a lot of things around the world and that includes how we live, work, and the way businesses are conducted in real estate. This has made many people embrace the idea of working from home and remotely. Though during the earlier stage of the pandemic real estate industry generally was being affected, not all the sectors remained inactive thanks to e-commerce that brought an increased demand for warehouses. And the need for medical supplies and some basic needs also help commercial real estate to have continuous activity with demand for retail spaces that can be used by pharmacies and grocery stores during the pandemic. According to Tey Yong Qing, we can only wait and see how long the pandemic will continue to influence the rate of commercial real estate in the near future.
