COVID-19 has clearly impacted the retail and office environments, although it seems we have been moving in this direction for quite some time
With the increase of Live/Work/Play developments, it begs the question was this the inevitable future of commercial real estate? Are we moving towards on site recreation and coworking spaces being the norm?
Cities like New York became the global hub of commerce because they are the central locations for global headquarters, advertising agencies, large banks, monetary exchanges and the like. As we approach another decade in the new millennium, technology has made it possible in most cases, for these organizations to be located anywhere in the world, without reducing the efficacy or production of the employees.
New York and even heavily populated suburbs adjacent to major cities, are considered desirable for the lifestyle they provide. A lifestyle that includes access to shopping, child care, gyms, parks, restaurants, entertainment and of course the office. Prior to the COVID-19 epidemic there was already a glut of office spaces on the market- granted it was a brokers paradise as one could still demand market rate price per square foot, and entertain multiple offers. Not anymore...
Can We Stop The Bleeding?
Its going to take a lot of creativity and introspection but we can make office space in high density areas desirable again. Some could even be repositioned into live/work/play spaces with multi-family, coworking and coeducation spaces (think homeschool coop). Theoretically, this model could be applied to transform former office space in NYC, where the Real Estate rules are often stretched or broken entirely in order for companies to gain access to 8,000,000 residents with high median income.
Imagine Live/Work/Play office towers where you can efficiently get to your office, get your work done, take a quick break for the gym and then be home after a quick elevator commute. No Traffic, No crowded subway. Plenty of time left over for recreation and a stroll in the park afterwards with the family or solo.
But this pandemic has shown me I love my commute, it’s time that’s just for me
I get it, the family "bonding" has devolved into family "fighting" well then imagine just Work/Shop/Play/School - a single destination for families where mom and dad head to the office on the 34th floor while their kids head to day care and 2nd grade in the floors below. With ample shopping in the building and nearby, family time increases as does time alone since there is also a gym in the space. Is this the future? While right now retail is in flux and working on damage control, the future of retail real estate could potentially be fit out for restaurant, entertainment, flex, or special purpose. Restaurants are not going away. Eventually when the virus is under control and the public is more comfortable, they will rebound. The biggest shift will be in mercantile retail where adjustments to in-store and online experiences will have to happen. Many retailers have made the shift seamlessly but large discount stores like T.J. Maxx, Marshalls, and others who have a limited online shopping system, will struggle to emerge.
But is this what the people want? For real estate professionals, we can recognize the value in consolidated spaces and diversity in tenant's needs and use cases. The offering and value for a property of this type has the potential to skyrocket. With that said it's not an overnight transition, it will take a lot of changing in the way we do business as well as the way we live, not to mention the shift in mindset. But luckily, the virus has taken care of the mindset part. With companies now saying that they are letting employees work from home for the remainder of the year, office real estate brokers, developers, and contruction teams need to get creative, NOW.
For this shift to happen, the biggest obstacles are going to be zoning restrictions as cities come to terms with variances they may not have considered previously.