It might seem like the commercial real estate industry is in free fall every five years, right? But it seems as though the scares came a few years to soon. When recessions hit all aspects of real estate decline. But in this instance the decline of commercial real estate seems to be coming swift.
What is Commercial Real Estate?
The term commercial property applies to buildings or land expected to produce revenue, either from return of capital or from rental income. Commercial property includes offices, medical centers , hotels and malls.
Commercial Real Estate And Other Declining Businesses
The last nail in the coffin for many businesses was definitely COVID-19. The lessened foot traffic and mass lay-offs didn’t contribute to much profit in the few months. Although incentives were put in place to secure commercial property holders from eviction, it seems that this industry will never be the same. Since many business owners had to adjust to either operating from home, a smaller location with less employees or open a new business all together. But what ever the reason, even if everything is stabilized not every business will continue to have a physical location.
Why you might ask? The internet has become the new home to many business. Encouraged by the COVID-19 lockdown life as we know it has become touchless and contact -free. What does this mean for the retail spaces? It means that if they haven’t gone bankrupt yet they will move a larger part of their operation online.
Forever 21 And Chuck E. Cheese
You might be wondering why bring these two businesses up? But they both have something in common, they were both big commercial retailers or renters and they have both gone bankrupt. With Forever 21 being one of America’s “mall staples” and hundreds of their commercial stores are being closed across America with no definite endgame.The company filed Chapter 11 Bankruptcy and intends to regroup and evaluate their business much like Chuck E Cheese.
You might be thinking, “Why should we be worried that they can’t make rent?”. Well, considering their competition has a lucrative internet presence and less stores. Thus, nudging to competitors to follow suit, close up stores and take up shop on the internet. Just like Staples, Walmart, Target And Best Buy increasing their online selection every day while urging curbside pick up. And all this was happening before COVID-19. So where will this take us?
It will take us to a future that is outside the stores and in your living room.
Many analysts have very mixed feelings about the commercial real estate market. Some saying that it will be resilient while other are sure that it will be crashed. We at Advisight believe that it will be different. With the birth of new business and the old ones moving to the digital space will usher in an age of convenience. This age will only breed opportunity. So is the Commercial Real Estate Declining? No, its just changing.