COVID-19 Impact on CRE: Accelerating Trends and Secular Shifts

Apr 29, 2020 | Innovation, Multifamily, Technology

There’s a lot of chatter and speculation in the commercial real estate community about what a post-Corona world will look like. Is business travel dead? Will consumers ever shop in malls again? Are we all going to be working remotely? Are people going to move out of cities and into the suburbs? Will we have to practice social distancing in restaurants and bars? What happens to gyms and fitness classes?

Who knows. I think the world is going to look very different over the next few months, but we’ll eventually begin to act more and more like we did pre-Corona. It’s important to remember that how people behave and think during a global pandemic is not a great indicator of how they will want to live their lives when this is all over.

I’m of the belief that the COVID-19 pandemic will accelerate trends that were already in motion and cause some other secular shifts we may not have expected.


I’m not betting against cities and I don’t think density will be viewed as bad in the future. We’re not all going to move to some remote suburb, work from home, and communicate with friends and family via Zoom. There’s tremendous economic value in interacting with people and sharing ideas. The benefit and joy of living in cities will far outweigh any real or perceived health risk.  

Office Space

More companies will adopt a hybrid remote work strategy, but the office isn’t dead. Most companies will be back to normal. The trend of declining office square feet per employee will reverse and offset the space lost due to increased remote work. In NYC the office space per employee decreased 17% (~50 SF) since 2009.  

Every person I speak with prefers a hybrid approach where they get the magic of being in an office surrounded by people with the flexibility and productiveness of working remotely. Working remotely doesn’t necessarily mean working from home, it could be a coffee shop, hotel lobby, a local co-working space, or some other 3rd space.  


The hospitality sector is in for a world of pain, even after the stay at home orders are lifted. We won’t have any major conferences for a long time, most people won’t be comfortable getting on a plane in the near-term, and business travel will be slow to rebound.

Lenders will only be able to extend and pretend for so long. There’s no shortage of dry powder ready to take advantage of distress when it comes.  

Student Housing

The education system in the U.S. is broken. The cost of tuition has increased more rapidly than inflation. We have a student loan crisis.

College is a great place to learn about who you are, have fun in a controlled environment, and get a credential that helps you land a job at a name-brand firm. But college is not the only, or the best place, to learn.

As learning continues to shift online and enrollments decline (especially in 2021 as students opt to take a gap year), demand for off-campus housing will drop. I expect a lot of distress for student-housing, especially at secondary schools. To compound issues, state budgets are being slashed and funding for many public universities will drop drastically.


I’m not sure what to make of retail anymore. Who would have thought national credit tenants would just not pay rent and be able to re-trade their lease agreements? Do cap rates expand and do landlords require larger deposits? They have to, right? I now see that tenants are asking for clauses that give them rent relief during a pandemic.

Under-capitalized and poorly located retail will continue to struggle. Class C malls are still in trouble, but what about Class A malls that have become more entertainment-driven over the past few years? Is the American Dream (mall) dead on arrival?  

E-commerce will continue to eat a larger percentage of retail sales and with baby boomers now shopping online, this trend will accelerate. Low-margin physical products will never be moved online. The math doesn’t work.


People need a safe place to reside and apartments are well-positioned to weather the storm. Virtual leasing is here to stay, and new developments may shift their design to incorporate more home office set-ups and dedicated co-working space within the clubhouse.

The slow down in new supply should help rents and occupancy rebound over the next 1-2 years.

The question I’ve pondered throughout my career is what happens to class B/C apartment investments during a downtown? I’m about to find out.

What is clear is that real estate will be impacted in expected and some unexpected ways, but the evolution of real estate is nothing new. Technology is reshaping the way real estate is designed and operated and the coronavirus is accelerating these trends that were already in motion.

What are the major impacts the coronavirus will have on CRE?