2020 was a year of uncertainties, and there are no two ways about it. The Covid-19 pandemic created havoc in the economy as the world came to a standstill. 2021 was a year filled with hope. As the vaccine distribution ramps up, the economy is slowly limping back to normalcy.

While there may be changes that we need to adapt to in the future, the coming years will be remembered as the post-Covid era. Some businesses like online shopping or doctor consultation have taken a paradigm shift. But the others may see a short-term correction and will continue to stay the same as before in the long term. Commercial real estate ran into deep trouble for most of 2020. People shut stores and continued to work from homes. The economy is recovering, and we can hope that commercial real estate shines through the coming years.       

So, what changed in 2020 and what does commercial real estate look like in 2021?

  1. Cooperation between Lenders and Investors

Many business establishments such as restaurants, theaters, travel, and offices shut down during the pandemic. The government instructed the rental landlords not to evict the tenants or force them to pay the rent. The borrowers struggled to make mortgage payments as their rental income stopped. Yet, there was no massive disruption in the commercial real estate market because of two factors.

  • The government rental assistance programs helped the property owners with the cash flow.
  • The lending institutions cooperated with the borrowers by modifying the loan terms. They extended the mortgage payment dates giving time for the borrowers to arrange for finances rather than opting to foreclose.

The government and the lender’s support helped the commercial real estate survive the trying times.    

  1. New businesses, new needs

With people switching to online shopping, there is a sudden demand for warehouses particularly, cold storage. New facilities are needed from the port to the warehouse to the last mile. The retail stores and logistics businesses are growing, and so are their needs for fulfillment centers. Investors can take advantage of commercial real estate by leasing their property to warehouses.

Also, there are ample opportunities for physical locations that offer drive-through and curbside pickup to encourage contactless delivery. But will the concept of these dark stores last beyond the pandemic? Yes, because it saves time, money, and effort. People can save on the delivery charges. They save time and effort by not going inside the stores to look for products they can easily order online. Investors can look for retail properties in popular market areas to convert them into dark stores such as retail outlets or distribution centers.  

  1. New Standards in Office Spaces

The majority of the employees have moved out from offices to their homes. It has given rise to reverse migration where cities are becoming less congested, and towns are seeing a growth in population.

Many of the IT enterprises have already suggested the idea of satellite offices in different towns and cities. It will see the office space distributed in many cities and towns across the country. So imagine, instead of one big office space in San Jose, there will be smaller offices in Texas, Seattle, New York, Florida, and other prominent cities. It essentially means the commercial real estate deals will be distributed instead of getting concentrated in certain hubs.

What to expect in commercial real estate in the future?

  1. Lenders will finance properties with healthy building features to make them a good property for the long term.
  2. Diverse tenancy with staggered lease expirations will help commercial real estate owners to fetch a steady source of occupancy and rental income.  
  3. Lenders will be more interested in the transformative potential of the property. The property has to adapt easily to new trends such as a retail storefront converting into a co-working space.
  4. A diverse portfolio with commercial real estate in different cities will help to withstand downturns.
  5. The online shopping trend will stay, and there will be the necessity for fulfillment centers and storage facilities.
  6. Suburban areas will benefit from the need for warehouses and distribution centers.  
  7. The working office spaces will be more concentrated in smaller cities than in congested big cities.

How to Safeguard Commercial Real Estate and Maximize Profits?

The future is uncertain. Investors can take advantage of the low real estate prices to look for smart investment options. Also, the low interest rates will help them get a better deal. Real estate consulting services can be a smart option for investors confused about the market dynamics. Smart investors know the importance of value investing in commercial real estate. In such a scenario, a real estate consulting firm can offer advice on the strategies to get better ROI. Hiring reliable commercial real estate services helps owners to make informed buying decisions and be prepared for the unexpected.

Wrap Up

Commercial real estate may change in the near future. For now, the demand is robust for some sectors such as e-commerce warehouses, storage facilities, medical shops, and grocery stores. Investors can still expect good returns on commercial real estate if they think for the long term.

Also, the city residents who had moved to suburban areas are now returning to major markets. They may not move back to the same city but are preferring to stay in cities that offer better job opportunities. Cities like Raleigh & Charlotte (North Carolina), Austin & Dallas (Texas), and Las Vegas (Nevada) are experiencing positive traction in real estate. It is a good opportunity for investors to lock in some good commercial real estate deals in these cities to maximize their ROI.

Commercial real estate in the US is going to be an interesting dynamic going forward. We have to wait and watch.