What's the Latest with the Commercial Real Estate Market
April 23, 2020
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To dive deeper into the state of the commercial real estate market and the economy here and abroad, keep on reading. (We have graphs!)
TL;DR - As the coronavirus is making a significant impact on everyday life, people and businesses are thinking about how to come back.
Part I: Short vs. Long Term Optimism
A recent poll conducted by LinkedIn surveyed both upper-level managers and lower- and mid-level employees. The poll simply asked two questions: do you you think the economy will be better off or worse off in six months from now and again in two years from now. Below are the results of that short but important survey.
In the short-term (six months), respondents were split about equally between the economy being better off, worse off, or the same as it is right now. Upper-level managers, however, did skew towards the economy being worse off six months from now versus how other employees thought the economy would be in the short-term.
In the long-term (two years), respondents overwhelmingly voted in favor of the economy being better off in the future versus right now at nearly a six-to-one ratio. Upper-level managers did learn toward thinking the recovery would rebound better than did other lower-level employees.
Part II: Performance of Sector-Specific REITs
The American Business Journals and the S&P Global Market Intelligence recently looked into the performance of sector-specific REITs that did and continue to trade on the stock market over the past few weeks during the coronavirus pandemic.
From the chart above, we can see that all sectors, not surprisingly, have seen negative returns since the coronavirus outbreak. The sectors that are performing the best (i.e. lost the least amount of value) are the self-storage and industrial sectors. This is due to an increase demand in online ordering for the industrial sector and the little amount of in-person interaction required for self-storage. The REIT sectors hit hardest - retail and hospitality - correspond to those properties losing the most value in the marketplace.
Part III: The Future of Working from Home
For those people who are fortunate enough to still have their jobs and work from home (#WFH) - typically those jobs in white-collar, high-paying jobs - are seeing the potential benefits (and set-backs) of working from home. In a recent Gartner survey, C.F.O.s were asked on how they plan to use their existing commercial real estate space in the future and how working from home might impact their workforce.
From the chart above, about 25% of respondents said they plan to bring all of their workforce back into the office to work once the coronavirus pandemic is over. Only 6% of respondents plan to keep half or more than half of their workforce working from home. The remaining respondents (about two-thirds) believe that anywhere between 5 and 20 percent of their workforces will continue to work from home.
While the coronavirus pandemic has certainly up-ended everyone's personal and business lives in some form or another, work and life will continue. The question remains as to what that personal and business life will look like in the near and distance future.
-Here's to the Fundamentals.
Based in Downtown Tampa, Fla., Nico Hohman is an award-winning real estate broker, business growth and workforce housing advocate. Nico currently serves as the Director of Commercial Real Estate with Tomlin Commercial. Mr. Hohman was the Founder of Hohman Homes and HHRG, residential and commercial real brokerages based in Tampa Bay with over 30 employees. Nico is the Chairman of the Hillsborough County Historic Resources Board; a Director at Stellar MLS in Orlando, Fla.; and a former member of the Board of Directors at Greater Tampa Realtors. Schedule a time for Nico to speak to your brokerage, company, or association by connecting with him on LinkedIn.