Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24
How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - 17th Feb 24
Why Rising Shipping Costs Won't Cause Inflation - 17th Feb 24
Intensive 6 Week Stock Market Elliott Wave Training Course - 17th Feb 24
INFLATION and the Stock Market Trend - 17th Feb 24
GameStop (GME): 88% Shellacking Yet No Lesson Learned - 17th Feb 24
Nick Millican Explains Real Estate Investment in a Changing World - 17th Feb 24
US Stock Market Addicted to Deficit Spending - 7th Feb 24
Stocks Bull Market Commands It All For Now - 7th Feb 24
Financial Markets Narrative Nonsense - 7th Feb 24
Gold Price Long-Term Outlook Could Not Look Better - 7th Feb 24
Stock Market QE4EVER - 7th Feb 24
Learn How to Accumulate and Distribute (Trim) Stock Positions to Maximise Profits - Investing 101 - 5th Feb 24
US Exponential Budget Deficit - 5th Feb 24
Gold Tipping Points That Investors Shouldn’t Miss - 5th Feb 24
Banking Crisis Quietly Brewing - 5th Feb 24
Stock Market Major Market lows by Calendar Month - 4th Feb 24
Gold Price’s Rally is Normal, but Is It Really Bullish? - 4th Feb 24
More Problems in US Regional Banking System: Where There's Fire There's Smoke - 4th Feb 24
New Hints of US Election Year Market Interventions & Turmoil - 4th Feb 24
Watch Consumer Spending to Know When the Fed Will Cut Interest Rates - 4th Feb 24
STOCK MARKET DISCOUNTING EVENTS BIG PICTURE - 31st Jan 24
Blue Skies Ahead As Stock Market Is Expected To Continue Much Higher - 31st Jan 24
What the Stock Market "Fear Index" VIX May Be Signaling - 31st Jan 24
Stock Market Trend Forecast Review - 31st Jan 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Will Commercial Real Estate Recover in 2021?

Housing-Market / US Housing Feb 08, 2021 - 02:05 PM GMT

By: Sumeet_Manhas

Housing-Market

With the COVID-19 pandemic devastating many industries worldwide, tourism and commercial real estate are two of the most prominent and the most negatively impacted.

With remote working forced upon many companies across the UK and abroad, the commercial property market has plummeted; “fallen off a cliff” is possibly the best metaphor to highlight the industry's plight amid the pandemic. 

With tourism hit as well, hotel rent delinquency rates grew from 1.5% in the US during January 2020, to approximately 25% in July 2020 according to one report from Yahoo Finance


What Does the Future Hold for Commercial Properties?

With Twitter announcing that a large percentage of their employees will be able to work from home permanently, and Facebook stating that they are looking to hire workers remotely - the future of commercial real estate does not look especially promising either.

With remote working allowing people to escape the hustle & bustle of city centre life, will people retreat to the suburbs? The fact that you could live anywhere globally and work for a major corporation may also mean that city centre commercial properties could be hit even harder, with more supply and less demand. The residential property market is likely to be affected in too. 

Many experts such as Daniel Austin, chief executive officer at ASK Partners Ltd, suggest that commercial offices may transition into a hybrid model with home working, local office hubs, and a head office. However, the commercial property demand is likely to fall in 2021, with an increase in commercial properties bought to be converted into residential properties.

With the technological infrastructure in place thanks to the availability of high speed broadband, encrypted internet connections, video conferencing software and phone answering services, it’s possible that many entrepreneurs will look to cut overheads and start remote businesses too.

A Renaissance for Suburban Office Space

One of the big questions will be around city centre metro areas and landmark office and business locations such as Canary Wharf.             

In New York, the Financial Times reported that there has been a mass exodus to the suburbs, with people looking to capitalise on the remote working trend of 2020 and relocate to larger homes in areas such as Westchester and New Jersey. 

Back in the UK, Daniel Austin back in May 2020 stated that the inquiries around village properties for residential use soared, but they may have been related to the best weather in terms of temperatures and sunshine that the country had experienced for quite some time.

There is a chance that, as more people work from home and move away from city centres, suburban offices may become more common and office space in these areas may become more in demand. These local offices will allow people to work at home or near home and meet up and socialise with colleagues.       

Green Office Buildings

In London, living-walls are being implemented across the city to help offset some of the pollution. It is likely that this trend of green walls, biophilic designs and environmentally friendly construction techniques will increase in 2021. Despite the current exodus to the suburbs, it is still predicted that most of us will be living in cities by the year 2050. 

In China, they are planning to develop entire ‘forest cities’ in the Liuzhou area in an attempt to reduce air pollution levels.

Massive living walls have already be installed in cities such as Barcelona. The plants' maintenance is relatively easy, as they are all connected by tubes, allowing them to be fed with programmed doses of water and nutrients.

In cities such as Singapore, biophilic design has also been an essential consideration for the area's temperature. With plants able to reduce offices' temperatures, they can cut air conditioning bills in an eco-friendly way. The ‘heat island’ effect has meant that temperatures have risen over recent years in the densely populated Singapore. With global warming not going away any time soon, and the UK experiencing hotter summers than ever before, the cooling effect of living walls and green office designs is likely to be considered here too.

Warehousing & Industrial Properties

Thanks to the surge in online shopping during the pandemic, industrial warehouses and storage facilities that work with online retailers such as Amazon have seen an increase in demand.  

20% of US sales were online at the start of the pandemic, this rose sharply to 30% once the pandemic had led to lockdowns. It is thought that this rise would have taken over 5 years if it had not been for the pandemic. Because of this, the demand for warehousing and logistical services jumped dramatically.

Unfortunately, the demand for warehouse and online retail has been mirrored by the drop in demand for traditional bricks & mortar shopping.

Investment Opportunities for Property Developers

Whilst it may be bleak in some respects; some experts argue that 2021 may be the best time in decades to invest in commercial property.

Whilst the newspapers and the media in general will highlight the plight of any big named retailers that are shutting down, such as Debenhams and Topshop; that does not necessarily mean that investment in high street retail is to be avoided.

Smaller shops have also been hit hard by the pandemic. Whilst that is bad news for retail, it does give property developers and investors some alternative options when it comes to looking for properties that can be converted into residential homes.

The government is aware that the UK has more commercial property than it needs. For this reason, the government has issued new permitted development rights that allow investors to develop and convert commercial buildings into residential properties without the usual reams of paperwork that have to be endured and navigated.

Commercial property is relatively cheap per square foot, especially when there is a surplus amount on the market. Residential properties are often double the value per square foot. With the right investment, and the right skills or contacts, purchasing a commercial property in 2021 could prove a lucrative investment.

By Sumeet Manhas

© 2021 Copyright Sumeet Manhas - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in