LOS ANGELES (AP) – After a terrible 2020, when many tenants were left behind in rent or boredom, homeowners are seeing signs of improvement this year, including the rent for restaurants, bars and retail.
The trend of working from home և online shopping is still expected to permanently transform the demand for office և retail space, says Hesam Nadji, CEO of Marcus & Millichap, a real estate consulting firm.
Naji recently spoke to the Associated Press about the state of the commercial real estate industry and the prospects for a return as the economy slowly emerges from the epidemic.
H.2020 was a tough year for commercial real estate, especially retail. What does that passage look like now?
We’ve seen a surge in retailer confidence, both from landlord rental collections and buyers who are now willing to look at malls they previously did not want to see. Thus, the retailer sees this immediate type of trust and reopens the benefits, especially when it comes to restaurants, bars or entertainment. The retailer feels that the treatment cycle is starting և it is very encouraging.
Question. Will the growth of online shopping hinder the demand for retail space?
Answer. Through the epidemic, the adoption of e-commerce and the prevalence of e-commerce have been promoted forever. Experienced retailers – cinemas, fitness retailers, yoga – these were the best performers of retail, pre-epidemic. And pandemic, experimental retailing will be a big boost because people are tired of being at home. Where you really feel pain, there are things like furniture, department stores, and other grocery items that are much easier to get through e-commerce.
H. Do employers need less office space because many employees have shown that they can work well from home?
Answer. The office probably has a longer impact than any other type of property, as companies have learned that you can manage the workforce remotely, and people have learned that you do not have to travel every day to work. There is at least a partial virtual acceptance of the work by both the employee and the employer. Will it be 50-50? Will it be 70% tenure, 30% virtual? That’s someone’s guess. My assumptions are that 70% to 80% prefer to go to the office, but 20% to 30% become a permanent, virtual component of how we manage ourselves and our companies.
H. How soon will we see that this will be reflected in the percentage of vacancies?
For the next four or five years, when the current leases resume, that’s when it appears. I do not think that there will be a massive change in the dynamics of office space in five or six years, but I think it will have a lasting impact on those who have lived through the epidemic and learned from it.
Question. How has the epidemic affected your company?
– Commercial real estate was in excellent condition, pre-epidemic. So it was all about the shock of the job cuts, especially in the retail մանր epidemic of hotels, անոց investors were really pulling back to see how bad it would be. In the third quarter of last year, we saw that confidence returned fairly quickly և then really built a record for the fourth quarter.
H. How do some other categories of commercial property work?
Answer. The foundations are very firmly held back in the matter of self-preservation. There is power in the industrial market, due to the modern needs of warehousing distribution, which have large online retailers և most of the old industrial products are functionally obsolete. So there were a lot of new buildings that were absorbing very quickly. Industrial vacancies are very low and wage growth is very high, despite the fact that we have built a record number of new businesses in the industrial sector. Of course, we see the most pain in hotels and shopping malls. Older housing will also take time to rebuild, due to all the health problems and concerns that people now have with their elderly parents in care.
H. Do you expect the economy to reopen now, and the outlook for real estate to improve?
– I am sure that if there are no additional waves or bad experiments that really blow the wind out of vaccinating the economy, normalization will not only continue, but will get a lot of steam when we enter. the second half of the year.
The questions and answers were edited for length and clarity.