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How COVID 19 is shaping the commercial real estate sector?

COVID 19 is shaping the commercial real estate sector

The pandemic has been a determining factor of change for the commercial real estate industry. The leasing contracts have tended to diminish and landlords have been obligated to be more flexible in their negotiations. The commercial real estate sector, which includes hotels; restaurants; office buildings; retail stores and malls; has radically changed its long-term expectations and forecasts.

A recent article written by Anita S. Westcott, CPA member of ORBA’s Real Estate Group, underlined 4 ways in which COVID 19 is changing the commercial real estate sector:

  • White collars business trends: “The layout of office space likely will change, too. For starters, the trend toward open-space floor plans could come to an abrupt halt due to fears related to the spreading of contagion. Municipalities might introduce new standards for square footage per person, as well as the amount of enclosed space and HVAC. Air filters already commonplace in health care settings could be incorporated into office buildings”.

  • Retail Shift: “While the demand for physical stores continues to drop, the demand for the data centers that power online shopping and “last-mile” warehouses that facilitate quick delivery could grow. Some investors are already eyeing distressed properties, like big-box stores, that can be converted to industrial use”.

  • Safety and health concerns: “Designers may begin to employ antimicrobial materials more often for hardware and minimize tough-to-access (and therefore clean) corners or other places where pathogens can collect. Designers, urban planners and the like also need to keep in mind what could be a lasting aversion to “densification,” the dense occupation of space that had been growing in popularity in some areas”.

  • Tenant Negotiations: “Tenants experiencing financial difficulties are looking to their landlords for lease concessions or rent abatements. It may be tempting to institute sweeping policies that apply to all tenants (no concessions for anyone or a 10% abatement for everyone). The smarter strategy is to make decisions on a case-by-case basis.”

At MKThink we're working to help clients re-optimize their buildings and space portfolio for the future. Whatever it is, our role is to help you think through it and make the best decisions to match your space to your organizational objectives.

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