REAL ESTATE IN THE TIME OF COVID-19
As we all try to cope with our new world and everything it entails, I sincerely hope that you and your families are staying healthy and sane during this unparalleled time. Our hearts go out to everyone who has tragically lost a family member, friend or colleague. As trying as this experience is, it has been heartening to see people come together and make personal sacrifices for the common good. More so, our everlasting respect, gratitude and admiration go out to the many healthcare workers, first responders, delivery drivers, grocery store workers and the other essential employees who are heroically keeping our country together.
As for how this relates to downtown Chicago commercial real estate, never in a million years could I have imagined a scenario like this taking place. In my college economic classes, we never learned about a scenario where the economy suddenly came to a screeching halt. I know firsthand that there are a lot of businesses suffering permanent damage from this ordeal who may never recover. Those which do will likely never be the same.
As we hopefully creep closer to a return to whatever our new normal will entail and pray for the rapid development of a vaccine, I suppose it is time to start thinking ahead to what office life and downtown real estate will be like. I have been getting tons of questions about where the market is going and the truth is, I have no idea how this will play out. There really is no history to use as a guide. My suspicion is that things will remain quite unsettled and difficult until a vaccine is developed. If and when that occurs, I can see a recovery beginning at that point.
So many thoughts and questions have crossed my mind over the past month. Here are a few to ponder:
• How will showings work both near and short term? Will doors have to be left open in advance so no one has to touch anything? Can only 1 or 2 people tour at a time while others wait in the lobby? Will elevator access be limited? Will it be okay to pass out floorplans and marketing folders to prospects or do these now need to be emailed in advance? Should we just do guided video tours on Skype indefinitely?
• One trivial positive of this experience is that it could lead to the end of the handshake. Will something else replace it? I am not into the elbow bump and fist bumps still require hand contact. Will we bow? Flash the peace sign? Wave? Point? Nothing at all? One thing we all can agree on is no kissing on the cheek: https://www.youtube.com/watch?v=wuJPZJT-jh4).
• I completely understand the need for facemasks, but what will the etiquette be? Do these get removed once you enter the building and establish proper distancing? When walking from one building to the next on tours, will it be possible to talk with clients or too difficult to hear one another? Will I continuously bump into people and things when my glasses inevitably fog up?
• Will hand sanitizer and disinfecting wipes become a standard item in every lobby? Will security guards take your temperature before letting you inside? Will everyone who looks at space get a free bottle of hand sanitizer and a face mask with the building logo plastered on it?
• Will people be hesitant to enter an elevator with more than 2 people? Will people start using the stairs more frequently?
• How will office layouts be impacted? Will tenants need to downsize for economic reasons or end up needing more square footage to accomplish social distancing? Will workstations have to be reconfigured and will it be economically feasible to completely change these configurations in the middle of a lease? Is open space a thing of the past? Is benching dead? Will private offices make a comeback? Will wider corridors be necessary?
• Will firms need to divide their staff into “Team A” and “Team B” where A works in the office one week while B works at home, then vice-versa?
• What will the psychological effect on an office be when an employee tests positive for COVID-19 and everyone has to start working from home again? Hypothetically, what if a broker schedules a multi-building tour and the prospect tests positive for COVID-19? Will all of the building agents be out of commission for the next 2 weeks in quarantine?
• Will a building be tagged as undesirable if a case is diagnosed? Will buildings with medical clinics that do testing become stigmatized?
• How badly will this situation impact the office market and economy in general? Will this be a short-term hit followed by a strong comeback or will this cause permanent damage? What if so many firms have successfully mastered the art of working from home that they decide to make it a permanent part of their business? What if many of the laid off and furloughed workers are never rehired?
• Will suburban or neighborhood satellite offices become more popular to cut down on commutes?
• Will people be afraid to take public transit? If so, will this lead to more vehicular traffic and longer commutes? Will employees need to begin staggering hours as a result?
• How will coworking be impacted? Will the rate of default be so prevalent that it ultimately metamorphosizes into an amenity which buildings have to offer to land or retain tenants? Will the operators go away and simply become third party management agents for the facility?
• With the likely downturn in the market, how will real estate companies fare? Will there be an exodus of brokers leaving the industry? Will there be a consolidation of firms? Will the small shops be able to survive?
• Will the unsung heroes who have been keeping our buildings safe and clean finally be recognized for the fine and essential work they do?
• What new technology will result from COVID-19? Elevator buttons that do not have to be touched? Automatic door openers and closers? Advances in HVAC technology?
• Will furniture be constructed differently using materials that are more germ resistant? Will disposable desk pads become more common?
• Will tenants demand more cleaning and other services several times per day which cause operating expenses to increase? Will more staff be needed? Will the operating expense increases offset any rent reductions caused by the down market?
• Will buildings need to add onsite nurses like in schools? Will having an immediate care health clinic become as desirable of an amenity as a Starbucks in the building?
• Speaking of amenities, will anyone be utilizing fitness centers, take a building yoga class or sit in a collaborative lobby area, at least for a while?
There is a lot to digest. I will not even attempt to speculate how it ultimately will play out, but I do look forward to commencing whatever our new routine will be so I can find out. Until then, keep the faith and stay well.