3 Ways COVID-19 Could Change Real Estate Investing

Dated: August 29 2020

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When the COVID-19 crisis first hit the U.S., it was clear that its impact would not be short-lived. But now, roughly four months later, a lot of people are still reeling from the pandemic, and with cases surging in much of the country, it's clear that the problem is here to stay. And that has strong implications for real estate investors, who may be in for a rocky (or at least interesting) ride because of it. Here are three trends investors should look out for in the near term, and possibly the long term, that relate to the pandemic.

1. Commercial spaces may be in less demand

When much of the country went into lockdown back in March and April, many businesses had no choice but to pivot to online sales in the absence of being able to welcome customers to their storefronts. That was undoubtedly stressful at the time, but for some businesses, it may have been an eye-opener. In fact, there's a good chance that many companies that maintain storefronts will give those up if their online model proves successful, and that means there may be less demand for commercial space in the coming year or so -- and possibly beyond.

The same applies to office space. When the pandemic first struck, many companies told their staff to work remotely, and four months later, a large number of employees are continuing to do their jobs from home. As more and more businesses recognize that remote work is a sustainable model, they may opt to let employees do so on a permanent basis. And if that happens, the need for office space will start to wane.

2. Commercial spaces will need to be bigger

Not every business will want to revert to e-commerce and not every company will want employees to work from home indefinitely. But many businesses that wish to maintain physical storefronts will likely favor larger spaces that allow customers to spread out freely. Similarly, a lot of companies that choose to bring back employees may begin to recognize that packing people into cubicles isn't a wise practice even in non-pandemic times, keeping in mind that the flu is a recurring threat, and that the spread of germs is most likely when people are crammed into close quarters. As such, some businesses might choose to expand their space, and the demand for smaller offices and storefronts might decline.

3. Apartment living may be less desirable

Though suburbanites have by no means been immune to COVID-19, the outbreak has been far worse in major cities like New York. And while living in lockdown has been hard on everyone, it's been unquestionably challenging for city dwellers, who largely live in smaller apartments.

As these people get tired of staring at the same few walls day in and day out, we may see that in the coming months or year, city folks begin to seek out suburban homes that give them more room to spread out. As such, apartment building vacancies may soon become common, even in areas that were thriving before the pandemic.

Investors need to stay alert

Though the COVID-19 crisis isn't over, it's already impacting the way people live and the way businesses operate. Real estate investors should keep the above trends on their radar and make decisions accordingly to avoid potentially hefty losses.

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maurie backman
By Maurie Backman

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