How Has The Commercial Real Estate Industry Been Impacted By Covid-19?


Industries all over the world have faced serious difficulties as a result of Covid-19, one of which is the commercial real estate industry.

The widespread nature of this issue causes mass unrest and the uncertainty surrounding the pandemic continues to put the commercial real estate world into disarray. Here are two of the main issues that have arisen as a result of the pandemic, along with some of the potential escape routes to help the industry get back on its feet. 

Reduced Demand For Office Space

One of the major issues the industry has faced is a reduced demand for office space. As the pandemic struck almost a year ago, workforces moved out of offices to work remotely in their home office in order to be safe. Some companies who were based in flexible low cost offices or those with a monthly rolling lease managed to avoid much damage as they had no long-term contractual commitment, meaning they adjusted to remote working and saved money on their rent. Although, in this situation the owners of mentioned flexible spaces struggled massively as they had no protection from such a loss. 

For companies who had signed long term leases, they had little choice but to continue paying their bills. However, many companies who collapsed as a result of the pandemic simply could not pay the rents and were forced to file for administration, which left landlords in a dire position. The possibility of a quick sale through the likes of commercial property auctions was decreased as on the most part, investors simply aren’t willing to take the risk in a climate of volatility and uncertainty. 

It seems that in most situations relating to office spaces and the pandemic, either the company or landlord were left at a loss, which is disastrous for the industry. Majority-of-employees-working-from-home-not-using-officeAdditionally, although people were initially nervous about working from home, many began to enjoy the benefits of improved mental health, money savings from the lack of commute and a better work-life balance. Long term, it is inevitable that workforces will want the choice of working from home at least some of the time, especially if a business has proven that it functions perfectly well without being in the office. Therefore, the future of office spaces is looking extremely uncertain. 

Although over the last year flexible workspaces will have suffered, it seems like that format may be the logical way forward. Flexible and serviced office spaces involve a unique system where companies can rent out a shared office space, or an office within that space. This may involve a monthly rolling contract or a pre-agreed set period. The benefit of this is that although the cost of the space might be slightly more than having your own office as a result of the added amenities, overall companies would save money as they might only need half the office space they used to if part of their team would like to work partly, or fully, remotely.

This seems to be the best step forward for office owners, although the market could pick up as many businesses thrive when working in an actual office, as opposed to being remote. 

Decreased Retail Demand

Another area of the commercial real estate industry that has been impacted is the retail industry. Again, in March 2020 when the pandemic hit the world hard, many countries shut non-essential shops in order to attempt to take control of the virus. Yet, this of course had an impact on businesses. 

For some businesses, their online sales took off and completely transformed their company. This is especially the case in areas such as fitness, where the demand surged. Other companies managed to survive through online sales, yet many who have not previously traded online struggled to adapt quickly enough to survive. There are so many strongly established online businesses meaning that without investing money in a decent website, or managing to attract a wide audience on social media, it is hard to stay above water. 

Sadly, many businesses haven’t survived the pandemic as a result of this. Walking down high streets or city centres is quite scary actually, physically seeing the impact that the pandemic has had and trying to picture what the future might look like. Just like the remote workers, consumers adapted and began to see the benefits of shopping from home, meaning this could be a habit that is here to stay. That would result in a very uncertain future for physical shops. 

There has been some glimmer of hope, with online retail giants like ASOS and Boohoo buying out companies who were failing after decades of successful trading. Yet, it is scary to think that the highstreets we have grown up around have a very uncertain future ahead. CRE Loans is one of the best option for the real estate investors.

Gloomy Outlook for Commercial Real Estate Industry

In the commercial real estate industry, new investments aren’t common in this current climate as a result of the overwhelming uncertainty that comes with such a volatile market. Although there are areas of hope, it seems that there will be a long road ahead involving a lot of compromise and adaptation in order to reach some form of recovery. It is safe to say that working and consumer life will have changed for good, so waiting to see exactly what the future will look like for the commercial real estate industry will be a daunting time.