The commercial real estate changed 360 degrees in the year 2020. Although the changes were in the bucket list of real estate owners, the Covid-19 pandemic only accelerated the pace. It forced the tenants and investors to rethink the space used and the way business should run.
Considering 2021 and the future, it will be pretty challenging to segregate which change is the authentic stay and which was due to the pandemic. But both are important and cannot be ignored. There are many emerging commercial real estate trends through which individual investors can allocate capital to CRE assets.
The most important question is whether real estate will enter ‘new pandemic normal’ or re-enter the ‘pre-pandemic standards’? The answers might materialize in the shortest while, but retailers should be aware of five commercial real estate trends.
Retail businesses are no longer dependent on their storefront for sales, the reasons being both Covid and Non-Covid. They have optimized their shopping experience for the digital world and all digital devices. This signifies that retailers should have the skill of selling their products online and offline(store). A significant investment in digital capabilities is required as well for the expansion of traditional sales strategies. This led to the birth of trend two.
Stock room importance increased:
To fulfil the multichannel orders, retailers, especially the smaller ones, notice the difficulty in stocking up and the lack of centralized distribution. This led to the conversion of office spaces into small stock rooms. Here, they tend to pack, pull, and ship orders coming through digital channels. Additionally, they can also be used as a space to manage the local pickups.
The omnichannel increased the demand for stock room and storage space.
Spacing and Cleanliness enhanced:
To anticipate the nearest term, consumers are more inclined towards cleanliness and safety protocols. They expect the same from the retailers to minimize the risk of entering the public shopping space.
There will be various procedures for these protocols depending on property size, type, and market.
The methods include:
• Regular cleaning,
• Disinfecting the shopping carts,
• Air filtered system upgraded,
• Hand sanitization stations, and
• Limitation on the number of customers in small stores.
Augmented Reality is the new marketing
Although it is for younger demographics like millennials, advanced retailers use the technology as an omnichannel sales strategy. For example, it helps the customers try the clothes or match their floor colour with the environment virtually. The strategy needs smartphones or tablets as it is a positive choice not only of pandemic concern but also helps reduce returns and boost brand loyalty.
Experience of Retail Shopping:
To overwhelm the passivity of getting consumers to leave their homes, retailers increasingly add an experiential segment to the purchasing activity.
For example, Nike does this well. They bring the customers to their store to purchase a pair of shoes and ramp up the in-store experience by initiating events like basketball games and interactive brand-building experiences to allow clients to endure their products and not just try on the shoes.
So what crux should Investors and
Developers take out from these trends?
The sustainability of many commercial real estate trends is undetermined. They seem to be apt for short terms, but what will happen in the next 3-5 years? Will remote working, work from home, or co-working become the new standard, or workers will be happy to move back to traditional office buildings?
If we view from real estate investment standpoints, the tenants need to have a balance financial condition to make payment through all phases of the economic lifecycle. Along with that, they have to evaluate the models to cope with these commercial real estate trends.
On the other hand, real estate developers should also re-evaluate their building styles, keeping the trend in mind. For example, retail shoppers should focus on the smaller sales floor and large stock rooms in future. They should also construct dedicated parking spots for local pickups. Developers who will think innovatively about these commercial real estate trends will be able to take action and ensure high demand for assets.