WHAT DID THEY SAY
WHAT WILL THE STORY BE FOR HOTELS IN 2021?
WILL FLEXIBLE OFFICE SPACE BE IN A BETTER OR WORSE POSITION AS A PROPERTY TYPE?
WHAT WILL BE THE MOST COMMON REDESIGN ELEMENTS FOR BRICK-AND-MORTAT RETAILERS IN 2021? WILL THEY BE PERMANENT?
IS THERE A PATH BACK TO PROFITABILITY FOR SHOPPING MALLS THAT DONT INVOLVE REDEVELOPMENT/INTEGRATION?
Newmark Capital Markets Group Vice Chairman Thomas Dobrowski, leader of the firm’s retail transactional and advisory group (brokerage): There is absolutely a path back to both profitability and sustainability for many shopping malls spread across the country. Most shopping malls already contain a healthy concentration of apparel, experiential [retail], dining and services, as the trend to diversify the tenant base has been ongoing for the past decade. Where there is a need, however, is for more omnichannel platforms to service consumers.
There is tremendous opportunity to create and adapt current locations into this new hybrid model, which integrates traditional elements of brick-and-mortar retail with industrial and logistics technology.COVID-19 has demonstrated that consumers want options when it comes to shopping, which include the convenience of ordering online, picking up at the store and returning or exchanging at the store.
Most shopping malls fit the bill to introduce this new form of omnichannel retail, as they are extremely well located, with great access and a great concentration of retailers that comprise many of the most in-demand e-commerce retailers. The bottom line is the landlords that are able to adapt and offer this type of experience and service will not only be able to survive, but thrive.
WILL THE DEMAND FOR ADAPTIVE REUSE PROMPT REDEVELOPMENT OF THE CORE URBAN OFFICE BUILDINGS?
LightBox Principal Analyst Dianne Crocker(consulting):It will not immediately prompt the redevelopment of the core urban office buildings. Much depends on where the chips fall in terms of employers with office space in central business districts opting to leave in favor of suburban locations.
Companies with expiring leases will be considering how much office space they need, especially if they don’t plan on having 100% of staff in the office full time. These decisions will take shape over time and not be immediate. Essentially, the jury is still out on this. It’s safe to assume to a certain extent that the oversupply of downtown office space that we saw even pre-pandemic will be more pronounced in hard-hit cities like NYC and LA, so some will need to be redesigned into uses that are more in-demand, but again, this will not be sudden.
BONUS PREDICTION – SELF STORAGE
Blackstone’s acquisition of Simply Self Storage(for which Newmark advised) and Cascade Investment’s investment in the Storage Mart platform are representative of the diverse sources of capital flowing into the sector. This collection of growth capital will lead to self-storage transactions pricing more in-line than ever with the core real estate investment product types.
Leading into the early spring of 2020, self-storage operating fundamentals were indicating a robust leasing season with rebounding market rental rates. With the challenges of COVID-19, the traditional leasing season for self-storage was muted. However, activity rebounded throughout the second half of 2020 and the industry enters 2021 with all-time record-high occupancy. Given the operating strength with which the industry enters 2021, the expectations from early 2020 indications have been pulled forward and 2021 will be a benchmark year for rental rate growth, revenue growth and average annual occupancy.