The COVID-19 pandemic has crushed some aspects of commercial real estate while lifted others up. Its impact is too great — and still too uncertain — to pass judgment just yet.
So, we asked a number of influencers in commercial real estate to look into the future and predict its impact on commercial real estate in 2021.
Here are their thoughts:
William C. Hanson, president, NAI James E. Hanson (and chairman of Commerce and Industry Association of N.J.)
A descriptor for much of 2020, the keyword for New Jersey’s business community entering 2021 will be ‘uncertainty.’ Despite economic headwinds prolonged by the standoff in Washington, D.C., our business community has remained remarkably resilient. With vaccine administration underway, the prospect we will soon overcome COVID-19 is becoming more concrete. Although it will be critical for the business community to show the same tenacity that propelled us through this crisis’ most acute phase in the year ahead, equally important will be the state government’s collaboration with businesses to develop long-term solutions that lead to economic recovery, ensuring we emerge stronger.
Jeff Hendler, CEO, Logical Buildings
For much of 2020, many office buildings were closed. While homes and multifamily properties picked up the slack — serving as locations where people worked virtually — the impact on these properties was significant. The greater amount of time a building is in use, the more energy and water it consumes, and the more quickly systems will deteriorate. As the work-from-home trend continues into 2021, property managers will be forced to turn greater attention toward mitigating the consequences of this trend by managing building energy use, finding ways to reduce water waste and repairing/replacing building systems currently being used at unprecedented levels.
Tony Ianuale, chief operating officer/chief financial officer, Dresdner Robin (and co-chair of Urban Land Institute-Northern N.J.)
Despite the severe imbalances of 2020, we look for a rapid recovery in 2021. The current recession should be considered as an external shock upon a fundamentally sound economy rather than a structural imbalance like the Great Recession. Overall, the public infrastructure and utility markets are holding up well. Private real estate developers remain as active in pursuing projects to be delivered within a 3-4-year timeline as they were pre-pandemic. As expected, much of that activity is in the industrial sector, which has continued at an unabated pace, combined with continued strong activity in multifamily and senior/assisted living projects.
Jennifer Mazawey, partner, Genova Burns
Since COVID-19 turned much of the commercial real estate industry on its head in 2020, some sectors of the industry will experience a reset in 2021. However, we will see growth and change in other segments of the CRE industry. With the new cannabis legislation now in place, we will see significant activity by municipalities to prepare their communities for adult use cannabis (or to ensure that their zoning is in place to prohibit it). Would-be licensees in the cannabis space will be hard at work securing properties so they can demonstrate site control. This will result in continued growth for the industrial market and will be a bright spot for the retail market as well.
Rick Rizzuto, vice president, Transwestern
I anticipate a huge spike in industrial demand and very little supply during the first half of next year. With the creation of new funds seeking to acquire industrial properties across the country, any industrial ‘supply’ is likely to sell quickly; in some cases, before it hits the market. In the first half of the year, I expect an increase of rezoning hearings for failing retail malls and centers, with developers intending to convert those sites to industrial uses. Municipalities across the U.S., and particularly in New Jersey, will likely be open to this concept due to the ratables and value it will bring.
Frank Romeo Jr., president, Partner Engineering and Science Inc.
With nearly $14 billion in maturities expected in 2021 and a favorable interest rate environment, we expect a flurry of CRE refinancings, driving the need for environmental site assessments, property condition assessments, transaction screens and (records searches with risk assessments). A big question is: Will the shift away from major markets continue post-COVID? What could this mean for the struggling suburban office market? Some landlords may capitalize on such a shift, upgrading their suburban office assets, optimizing connectivity through Building Technology Assessments or increasing (net operating income) by leasing flat roof space to solar and telecom assets.
Lloyd Rosenberg, CEO, DMR Architects
The ubiquitous open floor plan can easily adapt for social distancing with new workstation and benching layouts, and by incorporating software to control maximum occupancy loads. Building owners and employers can also improve ventilation by installing UV lighting or Bi-Polar Ionization air purification in their HVAC systems, and we anticipate outdoor areas playing a bigger role in our designs to encourage higher use. We’ll see more touchless technology like heat scanners at building entryways and automatic interior door openers. We also anticipate clients looking for ways to decrease the need for employees to come back and forth throughout the day, with flexible spaces so that they can offer employees meals, fitness and communication options.
Thomas J. Trautner Jr., member, Chiesa Shahinian & Giantomasi (and co-chair of ULI-NNJ)
I think 2021 will see inclusionary development projects throughout New Jersey continue to secure entitlement approvals and commence construction to bring much needed affordable housing online. However, we will also see increased scrutiny of proposed projects that formed the basis for court-approved municipal affordable housing plans, but which may no longer be viable. This increased scrutiny will result in both opportunities and challenges for developers, municipalities, housing advocates and (in some instances) the courts — all of whom struggle to balance the need for affordable housing, the goal of sound planning and the familiar politics surrounding the Mount Laurel Doctrine.