Experts predicted that residential real estate would not be affected as highly as commercial real estate during this pandemic. Analysis of rent prices and vacancy rates for commercial real estate and number of homes and apartments sold/rented for residential has proven this to be true. This is due to the fact that home-buyers cannot postpone life events such as a move, births which can cause the need to move into a larger space, or life events resulting in the need for downsizing. These events do not go on hold because of a pandemic. However, commercial real estate developers have had to halt many of their projects. Some companies have stopped all negotiations for the time being while others have simply postponed current projects in various stages of development.
Though there has not been a very big impact on a weekly basis for retail and office vacancies and rent prices per square foot, the difference is definitely there. For example, vacancy rates since the beginning of the pandemic have stayed relatively consistent at around 19% and 22% for retail and office respectively. It is very easy however to see how drastic the changes have been compared to this time last year. Rent prices and vacancy rates are both increasing for retail and office spaces in Metro Atlanta. Vacancy rates have increased by about 2% for office spaces when comparing June 2020 to June 2019, while the vacancy rate for retail spaces has increased almost 4% when for the same time period.
Smaller retail stores are realizing they may not be able to stay afloat due to the mandatory closures, which has the potential cause permanent closures. Corporate offices are beginning to downsize because they discover they can easily work remotely and do not need to have every employee in the office every single day.
The main factor during this pandemic that has affected even large companies (such as Starbucks) is having to greatly alter the way businesses are run and even having to completely shut down. At the beginning of the stay-home orders, everyone assumed Mom and Pop shops would struggle, especially ones that had not been open for long. What people did not expect, however, is that even large companies who had to shut down or greatly reduce their capacity would be majorly affected as well. It is estimated that almost half of commercial retail (which includes restaurants) tenants did not pay their full rent for the month of May. Some companies could pay part of their rent or were able to pay all of it through payment plans, but many could not pay it on time or even at all. This affects everyone–the store employees, corporate employees and executives, landlords, real estate developers, property managers. The pandemic and the related closures and stay-home orders have greatly impacted how successful retail stores and commercial real estate in general could be and have changed the way these companies plan to operate going forward.
Commercial real estate practices are likely to change as there are less and less in-person meetings and building showings occurring. Luckily, we have the technology to do almost anything remotely, and this goes for commercial and residential real estate practices as well. Virtual tours are becoming very popular as well as virtual signings for properties.
Restaurants may also change their practices going forward. Those that have never used a curbside pickup system before may decide to continue using this service in the future because it can increase their sales and improve inconvenience for their customers. Many retail stores may also continue curbside or delivery services if they realize the profits will outweigh the costs.