I usually write about residential Real Estate as well as issues which affect this industry but today, I’m going to touch on a potential looming issue affecting commercial Real Estate.
Roughly 4 ½ years ago when we first heard about a strange ailment called Coronavirus or Covid-19. In March of 2020, it truly “hit the fan” in the United States and it was at that point, we were informed we needed two weeks for this issue to be brought under control. Obviously, the scenario turned out to be very different…and that’s quite an understatement. In addition to businesses having to shut down, medical facilities going into emergency mode, and many other measures being imposed, there was something which for the most part, was considered a positive result and that was the incredible expansion of remote working. It had been utilized to some degree back in my years in Washington, DC but not to the level which came out of the Covid crisis.
Remote working appeals to many employees because they can stay home and only need to look presentable during virtual meetings. It allows individuals to relocate to places such as the Mountain State so long as their homes have high speed internet. It eliminates commuting costs and it enabled many to leave large cities a few years ago during a time of civil unrest. That all sounds great! Doesn’t it? There is, however, a potential crisis on our horizon due to remote working.
Commercial Real Estate is facing a potentially dire situation given there are now so many vacant office spaces. Many employees have refused to return to the office and many companies have allowed this given staffing challenges. Obviously, we don’t want desolate downtowns like we had a few decades ago, but there are also major concerns due to loan defaults by prominent office landlords and a decline in demand for office space. According to Business Insider, commercial Real Estate prices could plummet by as much as 40%! After seeing so many downtown areas revitalized over the last few decades, I find it especially concerning that we could go back to empty streets along with vandalized offices and store fronts. I won’t name a particular company or organization, but I happen to know we have vacant office space right here in Morgantown. This problem is not limited to major metropolitan cities.
I don’t specialize in commercial Real Estate and I don’t have an economic crystal ball, but I do want to help spread this concern. I’d also like to draw your attention to what many have already complained about. Due to the incredible success of online shopping, many brick-and-mortar businesses have already disappeared. We no longer have department store icons like Sears and Montgomery Ward. Our state’s capital city, Charleston, no longer has the former Charleston Town Center mall. Some small businesses (aka mom & pop’s) have been run out of business by gigantic retailers. Having said this, I would argue that more vacant office space could lead to even greater challenges. We need vibrant downtowns and suburbs for economic success.