A lot of real estate practitioners and enthusiasts have argued about the rate at which coronavirus has affected the real estate market in recent times. Unlike past economic challenges that had affected the market in the past, the Covid-19 came suddenly and indeed had such an immediate and widespread negative impact especially on the Commercial real estate market.
Lagos is one of the most sought after when it comes to commercial real estate because the city is an industrial hub. Commercial real estate depends on businesses making money so as to pay their rent. However, the pandemic led to widespread retail slowdown and shutdown as some businesses started to fail, and this affected commercial real estate. Some business owners do not have rent to pay any more for commercial properties.
Another factor that contributed to the negative effect of coronavirus on commercial real estate was the lockdown which forced companies and business owners to make Work-from-home arrangements and permanent work-from-home policies. People are still working from home even though the lockdown has long been lifted so as to protect themselves from the pandemic which has continued to affect office space demand.
Sub-Sectors Thriving Amidst Pandemic
Some sub-sectors of commercial real estate are better positioned to ride out the pandemic, even though it seems like the majority have been affected. Such sectors include warehousing, data centers, e-commerce, retail shops like supermarkets, and pharmacy amongst others.
The Future of Commercial Real Estate
It is obvious that commercial real estate owners are already on the losing side as the market isn’t booming right now. The question however remains will we still need office spaces at the rate at which things are going coupled with the fact that so many people are now comfortable working from home.
Well, while workers have adapted solely to using online tools and virtual aids for work and meetings, thanks to technology, the need to have a prime office space remains. Apart from some sectors that can’t work from home due to the importance, it serves like supermarkets, pharmacies and the likes, some major companies would still need to go back to the office. Companies that rely on location which brings important benefits through networking and access to skilled workers would still go back to rent spaces from commercial owners.
This would still affect commercial owners because due to the slash in the number of businesses that would go back to the offices, commercial properties would be sold or rented cheaper.
Although this short-term revenue picture is hard for commercial real estate, the bigger concern is a longer-term shift in companies’ approach to leasing and renting space. Pushed to be innovative by the pandemic, many firms have found ways to do more from home. This is most evident in the tech industry, where companies are floating the idea of permanent remote work or work-from-anywhere policies, supported by platforms like Zoom Video Communications, Inc. (ZM) and Slack Technologies, Inc.
The future of office space is far from decided, as businesses split between working from home and having an office. As time goes on, the blended model would become the new normal where some businesses work remotely and other businesses that need physical office space for networking and sharing ideas in person continue to rent office spaces.
Recall that Propertydome had previously published an article titled “What You Should Know About Commercial And Residential Real Estate” where the differences between the two were spelled out extensively especially for the purpose of helping prospective real estate investors decide which to invest in. Having deep knowledge on the two sides of real estate is important as they both have their own set of benefits and challenges and so it is no easy feat to tackle.
