We’ll say what you’re already thinking: the pandemic has been absolutely punishing for commercial real estate. All over the US, companies have vacated office spaces to work from home. Economic activity slowed and sometimes ground to a halt, limiting the use of industrial spaces. People stopped shopping in stores and dining out, leading retailers and restaurant owners to fall behind on their rent or, for many, shut down completely.
But it is not all doom and gloom. As is true for the economy as a whole, so it is for commercial real estate: busts are the precursors of booms. Once we look at it from this perspective, losses can turn into gains once the economy swings back upward.
Here are some opportunities in commercial real estate in New Orleans. A word of caution: any optimism is best moderated for now.
While many companies got out of their leases as work from home became the new norm, University of Denver professor Glenn Mueller sees that others will want to go back to offices and will look for more space in order to make their office conducive for socially distanced tables and work areas. In effect, this demand for more space may offset the vacancy, creating a market for pretty much the same amount of office space as there is now.
An interesting trend may be developing not in office rental space but in office space for sale. Companies that got out of office towers may now be looking to buy their own office building in less congested areas. This way, a company that believes in better productivity when employees are in the same space can bring back their people while being able to observe health protocols easier than in corporate centers. Perhaps this explains the slight increase in office sale prices reported by a commercial realty in the third quarter of 2020.
Experts agree that this sector of commercial real estate is poised to recover, but not as quickly as some optimists say. It will perhaps take longer than expected to play out but historical data shows that new chefs and entrepreneurs appear and fill the empty spaces after a crisis. In 2006, before the financial crisis of 2008, there were 549,000 restaurants and bars across the country. This number fell to 519,000 in 2010 when the economy was still struggling with the effects of the financial shock. But by 2017, there were nearly 658,000. It took time, but the market did recover.
This sector is the only segment of commercial real estate to rise despite the challenges of COVID-19. This resilience was driven largely by the increase in demand for online shopping. As more people stayed at home and had more goods delivered to their homes instead of going out to shop, online retailers leased more and more additional last-mile warehousing facilities to shorten the waiting time for the deliveries.
If you’re looking for more in-depth and up-to-date information on trends and opportunities in commercial real estate in New Orleans, talk to one of our Realtors now. Contact Axis Realty Group today at 504.336.3000 or nicole(dotted)axisrealty(at)gmail(dotted)com.