Arizona Real Estate

COVID-19 may advance trends in commercial real estate

COVID-19 may advance trends in commercial real estate

COVID-19 may advance trends in commercial real estate

The coronavirus outbreak has quickly put the economy into turmoil. While many businesses are struggling to keep up with the drastic changes in the market, the commercial real estate industry may have some bright spots despite obvious uncertainties. The COVID-19 outbreak in the U.S. is expected to advance trends in commercial real estate that were established in the market before the global pandemic. Of course, the industry is facing some difficulties, but these are currently projected to only be short-term. In response to the coronavirus outbreak, the  NAIOP Research Foundation is suggesting an increase in demand for both industrial and office sectors. 


Need for Industrial Real Estate

Pre-Coronavirus, NAIOP projected that industrial real estate would face a decline in demand for warehouses by 2021 with the lack of available space. However, this projection is now being recalled. In fact, it’s projected to do the exact opposite. Consumers are relying heavily on e-commerce as they have been strongly advised to stay home. This growing dependence on online buying and delivery combined with the increase of store purchases for basic necessities is increasing the need for warehouse space to feed our supply chain. As a result, demand for commercial industrial space for storage and distribution is expected to increase.


Changing Outlook on Office Space 

Initially, the office space sector of the commercial real estate market is taking a potential hit with businesses being mandated to shut down or adopt to a work-from-home practices for social-distancing. This has left offices sitting empty with some companies renegotiating leases or opting out. The office sector of CRE will be forced to adapt as workplace needs will inevitably change. Some companies may need more space to allow social-distancing, while others may need less as they keep half their staff on a work-from-home set-up. 


Once the global pandemic chaos subsides, there is strong speculation that businesses looking to return to the office will have increased interest in co-working spaces and short term lease opportunities that allow more flexibility. Forbes’ recently wrote a piece on the future demand of co-working stating that smaller businesses and entrepreneurs will heavily depend on co-working. Collaborative workspaces can provide social networks and local connections that are essential to rebuilding momentum and cultivating a growth strategy..


Return to Retail 

As stay-at-home orders and temporary mandates of business closures were made to enforce social distancing and stop the spread of the virus, the retail sector has been the hardest hit. While consumers are waiting in lines at stores selling food, cleaning supplies, hygiene and medical supplies, other shops sit empty or they are reduced to curbside or delivery service only. A push to support local retailers and restaurants is strong, but the fact remains that retail is expected to feel the strain for awhile and new models of business are expected to evolve to meet the demands of virtual shoppers. 


The COVID-19 outbreak is unlike any health scare or economic downturn we’ve faced in the past. Prior to the pandemic, real estate was strong across the U.S. and Arizona considered one of the hottest markets in the country. While only time will tell, Arizona remains an affordable place to live and do business, which bodes well for commercial and residential real estate in the Valley. Trends are expected to bounce back, possibly even stronger than before. 


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