Beyond the Speculationtaurusmodal
By: Marat Safir
As we approach the 60-day mark since this health crisis evolved in the U.S., there have been almost instantaneous impacts heard around the country from all real estate sectors. Retail sales are down 16.4% last month (The Real Deal); office buildings within CBD’s are virtually desolate; industrial is holding onto a positive outlook, however, some indicators are showing an inevitable decline, (MBA) an estimate 3.8 million homeowners are in forbearance plans and occupancy levels in the hospitality sector is at a staggering 20%. While I’m not here to regurgitate what we’ve all seen broadcast on a daily basis throughout all networks and social media channels, I did want to highlight a few focal points.
Technology Saves the Day
Wake up, tech is taking over!
The commercial real estate industry has been historically slow to adopt technology, although today’s “new world” has thrust all of us into a fast-track approach to finding out what will eventually be considered the “new norm”. Without the likes of Microsoft, Slack, Zoom, and hand-held computers in our back pockets for collaborating, we would be in the Dark Ages. The industry and people of all ages around the world are embracing technologies, in order to stabilize our daily lives and to prevent the economic environment from falling into the deep abyss. Digitization & automation of processes will continue to pick up tailwinds, as we have seen some of the major vulnerabilities, and will push the resurgence of CRETech (commercial real estate technology) 2.0 and beyond. This fundamental shift is long overdue, and the way firms operate will never be the way it once was before. Every type of property and value chain category across all facets of real estate has been touched by CRETech, indicating that this will no longer be its own stand-alone sector but simply synonymous with real estate. It’s so much more than simply utilizing virtual tours to conduct transactions, it is enriched data-centric results that will empower businesses to make impactful decisions with greater speed and efficiency through SaaS, marketplace, IoT, and other wide-ranging offerings and business models.
The tech community has paved the way historically with their product management approaches, especially with lean & agile development practices. Collaboration and workflow tools have been a necessity for years and will now be even more instrumental in how we function with our clients and internally on a daily basis, especially in the commercial real estate space.
We’ve seen the 6’ & 7.5’ physical distancing models, seasonal mobility concepts, an agile system with teams working in shifts, moving back to the previous private office layout, reconsidering the suburban office environment, and rethinking of the office as purely a branding component that embodies the company culture. While these are all interesting & thought-provoking ideas, will these be long-term solutions? Probably not, considering the outlook is changing week-to-week and we have yet to see what new OSHA Health & Safety guidelines will ultimately be required standards, rather than merely suggested conditions to follow.
What we do know for certain is that staying clear from one another has driven cases on a downward trajectory, almost to a halt, which is why a fully distributed model seems to be safest & cost-effective in the midst of the global health crisis. (E&E News) Not to mention, CO2 emissions may drop by more than 5% globally and have been 15%-20% lower in the U.S. during the same period last year (nearly 31% reduction in building carbon emissions in NYC), which leads us to consider a greater cause.
This unique time has allowed everyone to realize that we can work remotely as nomadic workers & can be extremely efficient, in certain cases even more effective with the continued hyper-focus on technology. Today Twitter, Facebook, Google, and Zillow are among some of the US companies announcing workers can stay at home until 2021. Research is showing that nearly 60% of the workforce could be part of this paradigm shift in how teams will adapt (Gallup). If you can balance the culture, mental health of your team, and internal guidelines for a fully distributed workforce, the talent pool exponentially expands for your company.
As we are experiencing, even slightly moving into what we are all calling “Phase II”, there has been an uptick in cases and fatalities with certain states softening their shelter-in-place protocols. Many scientists believe the pandemic will likely subside over the summer only to return later in the year during a second wave that could be more fatal. So, I applaud our peers that are trying to be innovative in helping our workforce get back in action, however, I firmly believe that these solutions are a bit premature. At TMG, we are aggregating data and determining conclusively how to utilize space and optimize productivity for years to come. Once there are more tests for antibodies and vaccines that provide us a more confident outlook, a final determination can be made with how to elevate the quality of life for employees. Considering our population continues to grow, as well as the prominent outbreaks with the likes of SARS, Swine flu, Ebola, and Covid-19 during the last 17 years, we owe it to ourselves to codify a suitable long-term plan (WHO). I have no doubt that our real estate industry as a whole has many brilliant minds, still, we are not thought leaders in the health industry. Will a shield do the trick? What type of masks do we need to wear? How will we communicate or collaborate through the masks, shields, & distancing? What liabilities do businesses carry by allowing employees back to the office? How safe will public transportation be? How much time do we need to allocate to get to the office? How safe are elevators in dense CBD’s? Who will front the capital for these changes & will occupiers need to retrofit spaces beyond these modifications? The answers right now are simple, we don’t know.
The bottom line, change is good. We will eventually recover, rebuild & continue to incorporate new technologies for the foreseeable future. A few things are for certain, the workplace is not going away and the real estate sector as a whole is in for a transformational change. Building up this new muscle memory will make this transition easier over time.
Given the situation’s volatility, we will continue to consult with our medical experts and take the guidance and advice of the CDC, WHO and local government authorities to iterate on our plan, constantly upgrading individual measures based on the best scientific evidence until a complete solution is determined.
In the interim, let’s do the responsible thing & keep ourselves out of harm’s way until we know the facts. Remember, we are all human. So, keep your physical distance but keep socially interactive, it’s possible.
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