Commercial property could look different post-pandemic
The deadly pandemic has left commercial real estate at a crossroads as companies, businesses and people decipher how exactly to safely return to a fresh normal or how exactly to permanently revolutionize the way they will operate.
Subsectors in the commercial real estate business that absorbed the initial brunt of the pandemic are returning to a volatile financial market. Some restaurants and retailers permanently closed their doors, while some are revamping just how they offer and deliver goods and food to consumers.
Most landlords and tenants have were able to reopen their doors for business, in part, because of financial the help of the government such as the Paycheck Protection Program loan.
“Landlords received assistance so they haven’t really felt the strain during the last 12 months, nothing like they would if indeed they did not receive the government assistance,” said Jeffrey Tucker, senior managing director brokerage and principal for Bradley Company. “We haven’t seen a whole lot of vacancies and the vacancies that were available are beginning to complete on the (Class) A centers as a result of continued growth. That had not been what we were thinking we were likely to see last May. We thought we were going to see some real stress. Businesses were closing, (other) places weren’t open for business and parking lots were empty, but we really didn’t visit a lot of it.
With those funds, businesses like restaurants that had to close in-person dining and had to resort to offering curbside pick-up service last year have been forced to be imaginative for the long-term, according to Bill Bussey, associate broker for Bradley Company.
“There were a whole lot of restaurants that didn’t have drive-thru however the ones that have figured out ways to add it did that,” he said. “A lot of places like Biggby, for instance, are discovering drive-thrus only and sometimes both - drive-thru and indoor dining. They have made buildings they can devote a parking lot and it could have one or two drive-thrus, a double drive-thru only and also have some tables outside, but you cannot go inside.”
Tucker said other businesses which have mastered the efficiency of drive-thrus are Chick-fil-A and pharmacies, including those at places like Meijer and Walgreens since there is less human-to-human contact. Furthermore to less contact, the addition of drive-thru proved to be beneficial to businesses and landlords through the pandemic.
“From a landlord’s perspective, if they have a strip mall in fact it is not really a free-standing drive-thru location - if a landlord can only have two end caps with their investment, with their strip mall, and they cannot have two drive-thrus towards the end - that is lost income for them,” he said. “If they can’t work out how to navigate through the parking lot, and ingress and egress onto the key thoroughfare, that's lost income for them since the end cap with a potential drive-thru might, perhaps, otherwise be built for $22 per square foot, and if a Starbucks or McDonalds can continue the end, they could probably get $35 per square foot. It really is significantly more new revenue and that same pertains to pharmacies.”
Along with drive-thrus, Tucker said outside seating is a requisite for just about any new restaurant.
“They might reduce a few of their interior footprints, but I wouldn’t take up a new restaurant if I didn’t have at least 20 to 30 outside seating (options), because whether it is COVID or the following point, we see the value for the reason that,” he said. “People in Michigan wish to be outside.”
While some companies are closing, Bussey said some of those same companies are opening and expanding in new spots where they can become more visible. Some popular shops netted new locations through the entire country this year.
The businesses and the number of new locations this season, per Bussey, include:
5 Below: 170-180
Old Navy: 30-40
Citi Trends: 30
Dollar General: 1,500
T.J. Maxx: 122
American Eagle: 60
Dollar Tree: 1,000
At Home: 400
Daniel Burns, associate broker for Bradley Company and lawyer for Dan Burns Law in Grand Rapids, said the pandemic has caused employers to believe about how precisely they’ll use their work place.
He said some employers are deciding on open space, that was an idea employers were adapting prior to the pandemic. Now, however, some employers also are thinking about retracting space and also have their employees work beyond the office.
Burns said employers are now maximizing the utilization of technology, which might turn into a permanent practice. While there have been a whole lot of mergers and branch closings prior to the pandemic, Burns said banks and insurance firms are reevaluating just how they conduct business.
“I believe you will notice banks and insurance firms reevaluate their space, really going for a long, hard numbers look of which of these sets of employees we are in need of here, which ones are flex and which ones we are never going to bring back,” he said. “What the banks and insurance companies do could have a trickle-down effect and others will follow suit.”
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