December 17, 2020

State of the Market: The 2020 Impact on Commercial Real Estate

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In our recent article “The Future of Construction in the Pandemic & Beyond” we discussed the challenges COVID-19 has presented and the opportunities for the industry to evolve. Last week, we sat down with our principals – John Sadlik, Jerry Reich, and Henry White – to get their first-hand insights on what it has been like in the commercial real estate industry and what trends they believe will stick, versus those that might be short lived.

Here’s what they had to say:

What has it been like in the commercial real estate market over the last year?

Henry White: It has certainly been an interesting year. There was a bit of a slow down period as everyone reassessed where the market was headed, but more shovels are going back in the ground and more companies are becoming comfortable with returning back to the office in some capacity.

What processes or methodologies have you seen clients or project teams embrace more in 2020?

Jerry Reich: That’s really a multifaceted question – some have rapidly evolved, others continued to maintain an altered status quo with only essential staff – just at the appropriate social distance and separate shifts. It really depends on where you are in the project lifecycle, too. Early on we’re focused on how to virtually set-up the team and technologies to get the project kicked off right and making sure the design is flexible enough for the client to adapt their space overtime. As we start construction and continue through project delivery, we’re responding to new COVID requirements and ensuring we take a zero-tolerance policy approach to safety, state, and CDC guidelines.

What additional measures are being taken to secure job-sites?

John Sadlik: In addition to following the recommended guidelines and regulations such as masks, temperature checks, and COVID-19 screening questions, some contractors have utilized new disinfectant machines to ensure the work areas are sanitized and ready for project activity. The added disinfect practices are particularly useful for spaces where clients are looking to reoccupy areas post COVID-19 outbreaks.

How are clients adapting their space to future-proof their space after COVID?  

Henry White: Many clients are laying out their spaces differently to accommodate for COVID-19. Many are planning flexibility into their design to allow for the reconfiguration of modular furniture in the future, if needed. Other clients are building private offices to manage the separation needs, but are utilizing glass and other transparent materials to maintain the sense of openness.

Are there new technologies you’ve seen introduced that were not prevalent before this year?

John Sadlik: Yes and no – some of it depends geographically where the project is located, other parts depend on the client/team. In certain areas they’re allowing for online permitting submissions and virtual walkthroughs which were not previously allowed before. Others are embracing IoT wearable devices/hardhats and utilizing tools such as Matterport and BIM360 VR experiences to ensure more detailed coordination.

Some have predicted that 2020 will be the end to traditional office space as we know it. What do you think?

Jerry Reich: I think many companies may revise their work-from-home policies and look at things differently after COVID-19 is behind us. However, I’d have to disagree that commercial real estate offices are going away completely. There are certainly a lot of great ways to collaborate virtually, but you can't replace the collaboration and creativity gained by being in person. I would expect many companies may repurpose some of their space to create more collaboration areas/drop-in work areas. As we move through 2020, I do believe that the days of “business as usual” will be discarded and new business operations will adjust to account for employee health and safety, as well as potential liabilities that may become a driving force of change.

What questions should a landlord or tenant ask when partnering with an owner’s representation firm during this time of uncertainty?  

All: It depends on the client’s business, and their goals, but generally:

  1. Does your owner’s rep/project manager understand your business beyond how you will be utilizing the space day 1?  
  2. Has your owner’s rep/project management been in your shoes?  Do they understand not just how to build the space, but how the space will operate when you occupy?
  3. Do they understand how COVID-19 has impacted your business and beyond?
  4. Do they have a diversity of project experience where they can bring lessons learned/ideas from other industries to your project?
  5. Do they understand managing teams and culture as well as day-to-day business, as much as just managing space?
  6. Have they budgeted for COVID and anticipated adaptive plans for shut-downs?
  7. Do they understand lease clauses, beyond force majeure, to protect your best interests?