During the past year, whenever I meet a friend or acquaintance on the street, I don’t receive the customary greeting of “How are you”? It seems these days it’s more often than not, “What’s going on with commercial real estate now….you must be dying”!
Funny, but I haven’t felt any near-death experiences around the commercial real estate market during the pandemic.
Early on, our industry as a whole got pretty edgy pretty quick and for good reason. Offices, restaurants and retail establishments seemed to empty out at lightning speed during the Spring of 2020. Doom and gloom became the catch phrase starting in late March. Interestingly enough, the doom and gloom has not further materialized; in fact, quite the opposite.
Yes, there are a few more retail and office vacancies, space of all types and kinds are taking longer to lease. Some “for lease” signs around the market are getting a little frayed and weathered from being in place for so long. But generally, activity in most of the commercial markets has been surprisingly active. There have been some decent sized purchase and sale transactions during the pandemic, and while there haven’t been a lot of super-sized lease deals, there have been a bunch of smaller tenants signing new leases on a pretty regular basis. Retail certainly has had some obvious setbacks, but recently gains are being made in that market segment as well.
I won’t say that we’ve had a banner commercial year during COVID, but we’ve been busy for the most part, and lots of my comrades in the commercial brokerage business are telling me a similar story. While the commercial market is still somewhat suffering, it has a steady pulse, and that pulse seems to be rising. Activity is picking up gradually, and steadily.
Believe me, I don’t for a moment mean to discount or fail to recognize the worldwide devastation and human suffering the COVID-19 pandemic has brought. The health of the commercial real estate market is pretty insignificant when you take into account the lives that have been lost or upended because of the spread of this horrible disease.
Clearly lots of things in our daily lives taken for granted pre-pandemic are vastly different from where we sit today. I must say, it’s a little weird rolling into our 175,000 square foot building in Downtown Boulder most mornings. Now the only work-day inhabitants here are my eight office team-mates, the building maintenance crew, a couple of delivery folks, and that’s pretty much it. Talk about social distancing; I don’t think I’ve seen another human in the elevator or parking garage for the better part of a year.
So, what’s going to happen to the office market in particular? My prediction is this: After the majority of Americans are vaccinated, I think offices will fill up again. When that happens, retail, restaurants and bars servicing those workers and tenants will pop back, maybe even with better sales numbers than those of pre-pandemic days. There’s been a lot of talk about the return of the “roaring 20s”; I tend to believe that is a strong possibility. People are ready to go out, be out, travel, and socialize like never before.
Employers and employees want the comradery and order that comes with going to an office — an actual, real, designated place to work and collaborate. Working from home has been an interesting break from reality, but it turns out it may not be the best environment for the working world. It’s going to be a sad day for the dogs and cats that have gotten used to having company at home, but who knows, they may be ready to get rid of us for a while.
The question, I think, isn’t “if” offices and retail will fill up again, but “when.” My feeling is that the “when” is coming, and soon. Hopefully the “when” is as soon as late this summer, maybe sooner, provided the majority have been vaccinated and feel safe enough to be in a group. Perhaps one of the bigger problems coming for employers then, is going to be absenteeism. Not from illness, but from the hangovers or socializing too late in the evening, which will be a welcome relief for all.
Geoffrey Keys is the president of Keys Commercial Real Estate in Boulder.