Commercial Real Estate Predictions for 2021January 26, 2021
2020 was a year unlike any other. Trying to describe or characterize it understates and minimizes what happened.
What’s in store for commercial real estate in 2021? Numerous discussions with clients and colleagues reveal guarded optimism based on a shared belief that vaccine distribution will improve.
Here are our top predictions for commercial real estate in 2021.
- Continued proliferation of drive-throughs and curbside pick-up. These became popular and are very convenient for the elderly, customers with children, and those with mobility or physical disabilities, and provide protection from cold and inclement weather for all.
- Continued expansion of outdoor dining after the pandemic subsides. People like it. Cities and towns will need to update regulations to catch up with what was allowed on a temporary, emergency basis in 2020.
- Much more aggressive repurposing of interior mall spaces (and entire enclosed malls). More will become vacant as tenant bankruptcies and store closings continue. Something is better than nothing. Some great alternative uses are already flourishing including remote learning centers, day care, senior and community centers, performance arts, and the like.
- Brick and mortar stores will still be needed to enhance physical connections and experiences and also as pick up and return locations to complement online shopping.
- Property redevelopment and repurposing will far outpace ground-up development, as owners adapt to new marketplace changes. Communication with municipal officials is key because seemingly simple changes often result in unexpected and frustrating tension with older zoning ordinances and regulations. Variances and waivers will be in high demand.
- Mixed-use projects with a residential component will be strong.
- Increased investment and development in industrial areas (including warehouses, fulfillment centers, distribution centers, data centers) and life sciences. These sectors thrived in 2020 and will continue to do so in 2021.
- More robust lease renegotiations and amendments for office and retail leases. Short term, stop-gap amendments will expire and the landlords and tenants will be forced to thoughtfully address post-pandemic economic realities.
- Return to the office will happen faster than expected. Not the same as before, but much closer to before than now.
- Transaction volume will increase as pricing uncertainty lessens and interest rates remain low.
- Dispute resolution (litigation, arbitration and other) will flourish. Creative but practical thinkers and effective communicators and negotiators will be rewarded. “Getting to Yes” book sales will increase by at least 10%.
- More long-term loan workouts. Short term, stop-gap modifications will expire and lenders and owners will be forced to thoughtfully address longer-term post-pandemic realities.
- Opportunity Zones will be reinvigorated.
We are here to help answer specific questions and offer advice on your options. Feel free to contact any member of our Real Estate Group.