Covid-19’s lasting impacts on real estate asset classes is the largest question for the real estate industry today. Some of the significant aspects of this effect are highest-and-best-use considerations, cap rate compression (or not), and fundamental changes in end-user behaviors. End-user behaviors (and preferences) include those that are direct-to-consumer as well as those behaviors that are business-to-business in nature.
Some of this impact is directly due to the coronavirus, but, to some extent the coronavirus has simply propelled long-term changes that were already in progress.
We are seeing the familiar appraisal term, “highest-and-best-use,” become the agenda for gatherings of both private and public sector executives. And this is a topic concerning properties such as shopping malls where economic obsolescence is occurring almost on a real-time basis, as well as for organizations where underutilized real estate assets are a fundraising opportunity. If they are not already cities, counties, and state agencies should be evaluating all real property for possible redeployment or sale, if only to meet budget shortfalls.
The impact of the virus on end-user expectations, health concerns, and behaviors, is perhaps the major lasting effect of Covid-19.
Prospective investment returns are now in full fluctuation, and every real estate class is having a different experience. Some real estate in keen demand, such as life sciences properties and cold storage facilities, are seeing capitalization rate compression. At the same time, bricks-and-mortar retail is getting a full re-think, as is hotel and resort properties. The Covid-19 virus has caused a survival of the fittest exercise upon real estate assets, almost as if real estate was a living organism itself reacting to the virus.
The virus’ impact on end-user expectations, health concerns, and behaviors, is perhaps the major lasting effect of Covid-19. Contact-less customer experiences, BOPIS (buy online pick up in store) transactions, working from home, socially-distanced gatherings, meal and food delivery to home or work … these sensibilities are likely to be lasting. The design profession is already busy with repurposing existing facilities and places, and inventing new approaches to venues that address the new consumer behaviors.
All together, Covid-19’s lasting impacts on real estate, will be considerable and yes, there will be a new normal. On the positive side, some of this change is quite worthy and was already underway. Reaching for a comparison, some years ago when our industry was encouraged to learn and embrace what Feng shui sensibilities are about, what we found was that Feng shui was actually rather straight-forward design principles that simply made sense. The coronavirus is wreaking havoc on the real estate industry, but maybe the status quo and easy familiarity with the various asset classes needed some examination. If only for efficiency and re calibration with consumers.
Real Estate Asset Class Tracking
We have started to share online some of the tracking we do for clients. In our continuous updating, we follow major asset types, industry players, and the latest transactions by class. By definition our tracking pertains to real estate-based assets, and not to the other major asset classes such as stocks, bonds and cash.
Click here for more about our SCP tracking: Real Estate Asset Classes – the Latest
We track the following asset classes, as a helpful means for our clients to stay current with best-practices and emerging players. In each asset class, Covid-19’s lasting impacts on real estate is readily apparent and continuing to show its effects.
- Tech-enabled Office and Industrial, such as science and technology parks, data centers, cold chain, life sciences, and film production facilities, as well as general-purpose office and industrial product.
- Retail, including lifestyle retail centers, c-store fuel stations, and retailers as pertains to each retail category
- Hotels and resorts, including glamping and eco-tours
- Residential, including senior housing and care
- Attractions, including location-based entertainment and man-made ski & snow venues
- Recreation sports, including sports mega-complexes as well as outdoor recreation
- Mega projects, particularly mixed-use including major redevelopment and adaptive-re-use projects