• Tue. Jun 21st, 2022

Coverage against the effects of the current pandemic on real estate investments


The unpredictability of the past two years has made us all wish we had a crystal ball to see where our industries are going. The economic downturn caused by the pandemic, closures, business closures and consumer fears has hit many industries badly, but everyone wants a return to normal.

As we’ve recently learned from the airline industry and its spate of delayed and canceled flights, travelers want to come back, but airlines aren’t as nimble in restoring service: they need to rebalance the workforce. ‘work, the cost of flights and equipment with consumer demand.

In the commercial real estate industry, the retail and hospitality industries face enormous challenges in trying to return to pre-pandemic levels. The recovery takes time, and the struggles in these sectors are the best indicator that things will not magically improve in 2022, or even as early as 2023.

So what is going to happen? What I’m hearing from my clients is that planning for 2022 and beyond will be about hedging against the effects of the continuing pandemic and the threat of rising inflation, while trying to appease changing consumer preferences.

Here are my forecasts for three areas of commercial real estate:

Hospitality:

  • Hotels will start to rebound as herd immunity increases and consumer fears about the pandemic continue to subside, but meltdowns are still expected due to COVID-related hospitalizations, mask regulations and restrictions of travel.
  • Brands at all levels have allowed owners to push brand upgrades / PIP requirements for one to two years in response to the pandemic, so there is a backlog in upgrades and equipment from the pandemic. ‘hotel.
  • In response to supply and labor shortages and rising inflation, domestic demand for products will drive hotel prices up and impact the guest experience for years to come.
  • Hotels in the United States could see an increase in occupancy rates as unvaccinated travelers, who are not permitted to travel internationally in many cases, must choose domestic destinations at this time.
  • As price pressure increases, luxury travelers may want to consider hotels with limited amenities to enjoy leisure travel.

Retail:

  • As grocery stores and restaurants have turned to curbside pickup and more flexible options, demand has exploded. Thus, landlords strive to ensure the success of their tenants through more marketing and overall traffic support.
  • Many retail spaces will be reconfigured to become safer and more efficient at the point of sale.
  • The internet will become increasingly important in the provision of products and services, so retailers will plan their customer interface to be the same in terms of appearance, usability and efficiency in physical locations.

Office:

  • Office locations that demand higher rents and parking fees are likely to suffer in a climate where more companies allow workers to work remotely.
  • The trend to “work from anywhere” is not disappearing and has already had an impact on the relocation of workers to suburbs and small towns, as workers seek a better quality of life. Many don’t want to go back to commuting and have proven that a flexible work environment can be more efficient and productive.
  • Still, many workers benefit from mentoring and interactions with seasoned employees, making flexible spaces easy to change a growing trend. This hybridization will continue as more office and warehouse space combine into a popular new form of commercial real estate.

What are the futures of each of these sectors in common? The need for flexible solutions. All the moving parts of industries must be reviewed, recalibrated and redesigned to adapt to a constantly changing physical, cultural and economic climate. Either way, when there is change, there is an opportunity.

Tanya Hart Little is the founder and president of Hart Advisors Group, a commercial loan consultancy in Dallas. She can be reached at [email protected].