In a previous post (found here: https://www.beachchatter.com/2020/10/29/post-covid-real-estate-predictions/) we made some predictions about which trends during the pandemic may be permanent and which may be temporary. In that article, we predicted that the drop in urban desirability as a result of being able to work from home would be temporary, and though people would be moving South, others would eventually take their place in urban industry centers. Investors seem to be willing to bet on remote work, though. We do see people moving away from industrial centers such as San Francisco to cheaper areas like Sacramento, at the same time that commercial investors are putting money into Sacramento. The consensus appears to be that even though job centers will recover slightly after the pandemic is over, there are enough businesses embracing remote work that putting money into cheaper areas now before their popularity skyrockets is a worthwhile investment, and expensive urban areas aren’t a solid investment anymore.
Some trends are already appearing in how COVID-19 has impacted real estate decisions. The economy is going to recover at some point, so some trends are likely to be temporary. However, there will certainly also be long-term impacts as experiencing the pandemic has altered people’s outlook on approaching real estate decisions, and even decisions made for the here and now could have lasting effects.
The less permanent changes include fiscal troubles at the state and local levels as revenue from commercial real estate taxes drops, retail vacancies, and a drop in urban desirability, expected to be temporary because of urban districts’ importance in certain industries once job recovery is underway. With this drop in urban desirability comes people wanting affordable suburban housing. This is being achieved now by many people moving to the Southern US, which already features low-cost suburban housing.
In the long term, however, we expect plenty of attention to enabling more affordable housing through government action and zoning changes, as well as programs to help traditionally low-income groups, such as minorities, get into the real estate game. These programs would be a direct response to COVID-19, but with lasting impacts. Another such change is greater attention to health and safety within the technological infrastructure of commercial buildings such as hotels and restaurants, which need not be eliminated post-pandemic. But there’s also a major change that was brought about by the pandemic, but addresses a different issue entirely, and that is office size. The prediction is that companies will want more, smaller offices, in more spread-out locations. This is because companies recognize both the feasibility of remote work and also the importance of office space for coworker cohesion and training. Their solution is small offices where a few coworkers can reliably meet up regardless of where they live while they aren’t working at home.