Commercial real estate boom gone bust in 2020
LEXINGTON, Ky. (WKYT) - As the coronavirus drags on, the commercial real estate industry continues to experience a seismic shift in demand. Businesses are shifting employers to work-from-home positions permanently leaving thousands of square feet behind. Josh Smith, an independent wealth management advisor of Strategic Wealth Designers, says this COVID change is one that is here to stay.
“The commercial real estate industry has really been under the radar during this 2020 corona-stricken year but it’s hurting badly,” Smith says. “As bad as the coronavirus has been for the economy; for the employee, their freedom may never have become more great.”
From Seattle to Denver to New York City, companies are ending leases or downsizing their physical footprints. Outdoor and adventure store REI just completed a brand-new headquarters but announced they would be selling the building to permanently have employees work from home. Smith says in the near-term these types of transactions will have a negative impact on the stock market.
“The stock market likes growth, like sustainability and consistency. Right now we have contraction, small business owners trying to hang on and uncertainty surrounding the virus as well as the election,” Smith says. “Many will find that their companies can have a portion, if not all, their employees working from home and it will save the company and the employees a large chunk of money at the same time.”
The coronavirus has changed the way Americans are viewing space as well. Living on top of one another in highly dense areas like Chicago, New York or Boston has given way to suburban options with more land and the greater importance of a working space within the home. Smith says the map has been redrawn; expect to see demographics break out to many different areas that weren’t viewed as popular options previously.
“If you are living in New York City barely scraping by at $200,000 a year and you can move your family to Kentucky or Indiana with the same position and the same salary, you’ve just given yourself a massive pay raise, while still doing your job,” Smith says. “The major tech companies are giving their employees the opportunity to work from home forever in many cases, this could lead to great tech minds staying where they were from instead of moving to Silicon Valley to land that dream job. Financial pros and cons abound from this new world we are headed into, but it really does allow employees to rethink where and how they choose to live their lives.”
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