29 May 2020
Revisiting Real Estate Trends in the Wake of the Global Coronavirus Pandemic
At the end of each year, experts make predictions about trends set to impact the real estate industry, and we put together a quick-read real estate industry report highlighting a few of the most-talked about trends. Then the novel coronavirus arrived. While this doesn't mean "all bets are off," it's clear that priorities have changed for both residential and commercial real estate professionals. Let's look at trends that may be spawned by COVID-19, plus some of the earlier trends that remain important despite—or because of—the pandemic.
COVID-19 & its impact on the real estate industry
Recently, Forbes made a bold statement. “Now that hundreds of millions of people have gotten a new taste of how important “home” actually is—as a safe haven, a de facto schoolhouse, an impromptu remote office, and a forced, familial psychological petri dish—the spaces we live in, and more importantly what we demand of them, stand to look profoundly different in the post-coronavirus world.” And its not home plans that will be revised. As the economy reopens, business needs will be vastly different. Open office plans may disappear in exchange for spaces that allow social distancing. Co-working spaces, which experienced rapid growth in recent years, may need to be reimagined to attract customers back. As a result, the pandemic will have a long-term impact on both residential and commercial real estate. In terms of short-range trends, the economic fallout from coronavirus is already happening.
- Hotels, restaurants, bars and other entertainment and retail spaces have been hard hit, with a domino effect as these tenants struggle to pay rent or, in the case of large retail chains, attempt to re-negotiate the terms of their leases due to the decline in traffic to brick-and-mortar stores as consumers shop safely from home.
- Gaps in the construction supply chain are widening due to business shutdowns, social distancing standards, and increased competition for transportation and delivery services. This is having an impact on new construction and remodelling for residential and commercial properties.
- Rising unemployment numbers, coupled with uncertainty about when the country might return to business as usual, has hurt consumer confidence. Curbed reports that web traffic to real estate portals dropped nearly 40 percent in March, new sale listings declined by as much as 70 percent in some New York and California markets.
In addition, the buying and selling process will most certainly change. There may be greater demand for virtual tours to replace in person tours, for example.
Other trends where COVID-19 could have an impact
One of the trends we highlighted earlier this year was the rising popularity of co-living spaces. Boomers and Millennials alike had embraced the idea of pooling resources and sharing living quarters with friends. The reason for the popularity was two-fold:
- Reduce living expenses to address the lack of affordable housing or to increase the amount of disposable income available for entertainment and dream vacations.
- Make more personal connections. Technology has made it easy to connect virtually, but many people miss face-to-face interactions and a sense of community.
Right now, this trend could fizzle out or gain new ground. Why? People may be less interested in co-living arrangements, at least until a vaccine is available, because they’re concerned about exposure to COVID-19. This could be especially true for high-risk individuals, including older Boomers.
However, if the country moves into a deep recession or employment levels don’t bounce back quickly, splitting rent may sound even more appealing. Having spent weeks in solo lockdown, combined with the prospect that a resurgence in the future might require similar action, might make the idea of co-living with some close friends more attractive, despite the health concerns.
A second trend we noted in our real estate trend report was the likelihood of a recession. Despite positive performance in recent years, trade and monetary policies were already making investors and consumers nervous. Needless to say, the coronavirus pandemic has accelerated the country down the path to recession, the question now is just how deep will it be?
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