The Future of Commercial Real Estate After COVID-19
Commercial real estate has always been one of the most lucrative investments in Massachusetts. After all, investing in commercial property ensures you receive a steady cash flow for the investment. The high occupancies and predictable rents in the city guarantees that investors receive well-distributed incomes throughout the year.
The COVID-19 pandemic may have disrupted many industries and the economy, but commercial real estate will always remain lucrative. Like everywhere else in the United States, there have been drastic changes in the real estate market dynamics post pandemic in Massachusetts. However, as the fog clears and normalcy resumes, it is now easier to anticipate a prosperous future in commercial real estate investments.
If you are considering investing, this simple guide will highlight the most notable opportunities and weaknesses of the real estate market in Massachusetts and states in the Northeastern United States in general.
Changes in the Commercial Real Estate Industry Due to COVID-19
COVID-19 had a devastating effect on the US and global economy. The resulting slow-down was clear in the drop of the GDP rate from 11.3% in mid-2020 to just over 5.1% by the end of 2021. Some of the changes in the industry that were as a direct result of the pandemic included:
A shift in demand for commercial property
Commercial real estate is one of the key drivers of the economy. The enforcement of lockdowns and business closures at the peak of the pandemic really hurt growth and investors. The demand for real estate property dropped sharply overnight as businesses either closed down, scaled back, or sent their workers home to work remotely.
Over two years after the pandemic, it is now clear that business will never resume to the pre-pandemic levels. For instance, many businesses have opted to maintain remote and hybrid work, which means they may never need to rent as much work space as they did before the pandemic. Therefore, while offices may not be as essential as they once were, new investors must be forced to think outside the box as far as property investment is concerned.
The rise of e-commerce and how it impacts retail space
The pandemic forced the government to enforce social distancing rules in public spaces that severely impacted how people shopped. Many brick-and-mortar retail stores in Massachusetts had to close down, scale back, expand floor space, or offer online services. The decline in the need for floor space has had a massive impact on the real estate industry, especially in big cities. Going forward, investors in commercial real estate with a focus on the retail industry must consider how e-commerce has influenced the market.
Disruption of the financing and investment strategies
One of the lesser-known impacts of the COVID-19 pandemic is how it impacted investors’ financing and investment strategies. For starters, investors and their financiers have been very cautious when considering new investments. There was a massive shift towards more conservative real estate investments, such as residential properties, largely due to investors’ need to focus on stability and risk management.
The Future of Commercial Real Estate
Several factors and emerging trends already impact the commercial real estate industry in the post-pandemic world. Here are three of the most important trends that experts predict will matter the most to anyone considering investing in the industry.
The shift towards a more flexible workspace
Remote and hybrid work is now more common than ever. One of the main triggers for the great resignation in 2022 was the workers’ resistance to businesses attempting to get employees back to working in the office full-time. Ultimately, many businesses have embraced the new way to work and commercial real estate investors must recognize the new development.
Future commercial real investments must factor in the workers’ need to work from different locations. True, the cubicle is not dead yet, but the office of the future must incorporate technologies that facilitate communication and collaboration. In the past, these investments were considered perks, but may soon be necessary to make a commercial property profitable.
The rise of the need for sustainability
Sustainability is quickly becoming an essential consideration for buyers and renters in the commercial real estate space. The calls to mitigate global warming and the need for energy efficiency are now louder than ever. Eco -friendliness features are now more of a need rather than a preference when looking for business premises. Investors must play catchup when investing in new properties to ensure their properties are sustainable.
Impact of new technologies
Investors have always leveraged new technologies in new properties to outdo established and older properties in the market. Today, properties that incorporate cutting-edge technologies to promote sustainability, security, and enhance the tenant’s experience are in higher demand than those that do not. Since technology is constantly evolving, new investors must look even further ahead to find and leverage future technologies that are not mainstream yet.
Advice for Potential Commercial Real Estate Investors
If you are considering investing in commercial real estate today, here are a few pieces of advice that will help you make informed decisions:
Understand the current market dynamics, new trends, and shifts that influence commercial real estate demands. Staying well-informed is a sure way to identify new investment opportunities that a less-informed investor may not recognize. Constantly updating your knowledge on the real estate market, technology, economy, and societal expectations can also help you avoid costly mistakes.
Armed with this knowledge, you will find yourself better equipped to recognize new investment opportunities when they arise. The real estate industry is constantly evolving, and new lucrative investment opportunities open up more often than you think. If you have resources to invest, play the long-term consideration game and do not be in a rush to dump your resources in ‘the next big thing’ as soon as you hear about it.
Conclusion
The COVID-19 pandemic greatly disrupted the commercial real estate industry and caused significant changes in market dynamics. However, as we move towards a post-pandemic world, with the right information, strategy, and support, investors can navigate the evolving landscape and identify potential opportunities for growth and investment.
If you are considering investing in commercial real estate, the best next step you can take is to partner with experienced real estate professionals. The experts can help you make informed decisions about investing in commercial real estate and set yourself up for success in the long term. Are you ready to get started? Go to SovereignRealtyAdvisors.com now to get advice from the real estate professionals in Massachusetts today.