‘We should be prepared for a new normal’: 3 real estate experts on how the coronavirus is transforming offices and accelerating the rise of industrial property

  • Business Insider’s Dan Geiger spoke with industry experts from JLL, Goodwin Procter, and Warburg Realty about the short-term, and long-term future of real estate.
  • The three agreed the crisis has forced everyone from corporate executives to bosses of smaller businesses to rethink how they use offices.
  • Industrial real estate could be set to dominate as e-commerce adoption accelerates.
  • Landlords are considering whether investing in technology that promotes public health could add value to their buildings.
  • Visit Business Insider’s homepage for more stories.

The coronavirus crisis has had an uneven effect on real estate, as workers clear out of offices and work from home, and e-commerce soars, sending an ever-increasing amount of packages to industrial distribution centres.

During Thursday’s Business Insider Spotlight digital live event, Business Insider’s Dan Geiger spoke with Peter Miscovich, a managing director at JLL, Minta Kay, a partner at law firm Goodwin Procter and chair of the firm’s real estate industry group, and Clelia Warburg Peters, the president of Warburg Realty and a venture partner at Bain Capital Ventures about the short-term, and long-term future of real estate.

All three panelists agreed that the crisis accelerated trends that are already underway in the real estate world. When there is a vaccine, and social distancing protocols are softened, the world that we return to may look very different.

“We should be prepared for a new normal,” Peters said.

While we are still in the midst of the crisis, some outline of the new normal has already appeared.

Reimagining the traditional office

This crisis has forced companies and office workers to adapt to remote work, potentially changing the role of the office. Retailers, already facing a retail apocalypse, are at high risk of bankruptcy as foot traffic comes to a halt. There are early signs of a potential move to the suburbs as people escape high-density locations that have been disproportionately hit by the virus.

Miscovich, who advises corporations on their office space, said that this period of remote work has his clients considering new ways of structuring their office space.

“We are looking at reimagining how people work,” Miscovich said.

He said that people are questioning whether spending five days a week in a traditional office is really feasible. Instead, companies are considering a more distributed form of working, with traditional offices sharing space with virtual reality technology, a range of coworking centres, remote work, and even hotels as potential places where work can be done.

The office could be reenvisioned as a place that people work together, collaborate, and entertain clients, said both Miscovich and Peters.

The office building itself will also look different. Peters said that landlords are considering a range of technologies that promote social distancing and public health in buildings, like touchless entry, thermal energy scanning, higher-grade HVAC systems, and others.

“People aren’t making those decisions today, but some people will use it as a competitive advantage going forward,” Peters said.

Owners are making these decisions based on the potential return on investment, Kay said.

“Technology is not free, and investing in technology is felt by many owners to be of critical importance at this point, to a point,” Kay said, highlighting that technology that can add value to a building will be the most popular.

Empty retail stores and hotels could find another purpose

With retail stores and hotels empty, Kay sees owners considering to repurpose assets that aren’t making money right now. She gave the example of malls that may be empty now, but given their central location for a wide range of consumers, could function as e-commerce distribution centres. A change like this would accelerate e-commerce adoption and the dominance of industrial real estate.

Miscovich also said that both offices and retail will likely see a much wider range of sensory and AI-enabled technology that can recognise where people are and use that information to keep you safe, among a host of other potential uses.

The conversation also centered around the potential for people to de-densify, and move away from urban centres to the suburbs. Both Kay and Peters said that this could be possible, and even likely in the short term, but that they will return. Kay cited similar experiences during the 1918 Spanish Flu pandemic.

With President Trump signing an executive order banning immigration for 60 days, the panelists also considered the potential of this crisis continuing the increase in economic nationalism, stifling international deals.

“There is a lot of thinking now that all of this fear around transmission is going to keep border walls rising higher,” Kay said.