Commercial real estate may boom – or not – after this ends
The COVID-19 pandemic not only is pervasive in nature, it is having pervasive effects around the world. Some will be permanent, some will be long lasting, some will diminish or disappear over time.
It’s difficult to determine how, after a return to some standard of normalcy, the commercial real estate industry will function after office closures, social distancing and widespread financial impacts became commonplace, courtesy of the coronavirus.
Some companies will decide that working from home works for their operations and would be more cost-efficient, limiting or eliminating the need for brick-and-mortar rental space. Other firms may prefer offices and be enticed by rental opportunities, which may become more plentiful – and cheaper – if businesses shut down.
Two regional real estate experts, veterans in their profession, are 180 degrees apart in their beliefs on how this could play out.
“I think we’re going to find more employers wanting their employees working at home. Why crowd 20 people into an office space when six of those people can work comfortably at home?” said Scott Cavinee, broker of record for SWC Realty in Washington and Waynesburg.
Ovi Manciu, an agent with the Howard Hanna office in Peters Township, said: “I think there’s going to be a boom. A lot of businesses are going to be trying to find more commercial space.”
These Realtors are in concert on two things. Because Gov. Tom Wolf determined their profession to be non-essential several weeks ago, neither is allowed to go to his office or show homes to prospective customers – a vital element of their jobs. (Home inspectors are verboten as well.) So both are working from home, electronically or by phone, showing virtual (digital) tours of available properties to clients when possible.
The two likely will be back in the office after the virus has been quelled.
“Working at home (permanently), I couldn’t do it,” Cavinee said.
Manciu, father of three age 9 and under, lamented that their are a lot of distractions at his North Strabane Township abode. “Kids, pets, contractors coming to the door. When I go to my office, it’s to work. I know I get a lot done at office.”
After the recovery begins, Cavinee believes that “at least for the foreseeable future,” companies will have employees working remotely and in offices. He added that, lamentably, there may be a supply of brick-and-mortar properties that outstrips demand among would-be buyers or lessees.
“I believe that a number of commercial and retail office spaces will be available. Unfortunately, we have a lot of businesses that will be going out.”
An increase in employees working remotely, Cavinee said, could have a “detrimental effect on local economies” in towns similar in size to Washington, Uniontown and Waynesburg. “Fewer people walking up and down the streets, stopping in stores, going to lunch.”
Manciu acknowledges that the number of people working remotely could well increase, “but I don’t think it will have such a big impact. I think a lot of people, especially after the social distancing is over, will want to get back to work, back to their offices.”
He said the $2 trillion federal stimulus package, intended to revive the economy, could provide “a large incentive for small businesses and new businesses. New business owners may think this will be a good time (to pursue real estate).”
Commercial real estate, according to Manciu, was doing well locally pre-coronavirus. “But not as well as a few years ago in Washington County because of the oil and gas industry,” which has slumped since and is now struggling with excess product and drastically low commodity prices.
“Executives and everybody in that industry rented for one or two years, then bought (houses). There was no place to rent back then.”
Like the two Realtors, Jeff Kotula, president of the Washington County Chamber of Commerce, admits it is difficult to gauge what may occur in many aspects of life in the years ahead. As for commercial real estate, one of the chamber’s bailiwicks inside and outside Southpointe, he said:
“I would expect companies to have short-term and long-term approaches, depending on their industry and customers.
“Unfortunately, in the short term, many companies will experience revenue losses and look for ways to defer or cancel facilities projects and downsize existing spaces as a means to save costs. In the long term, I think companies will take a closer look at their real estate needs and make those determinations on an industry-by-industry basis.”
Some companies, Kotula added, “may have found it beneficial to have their employees work remotely during the COVID emergency and may move toward fully instituting remote working policies. We had witnessed this trend to some extent prior to COVID-19, and I think it will continue to grow.”
The bottom line, in other words is change is ahead.
“Life, unfortunately, is going to be a little different,” Cavinee said. “I’m not saying it’s going to be worse or better. Just different.”