As businesses continue to shape and implement their office reentry plans in Q2 2021, there are many signs of resilience and renewal. The hard lessons learned through a year of severe loss and disruption are guiding decisions to lease office space, open new retail concepts, and find the best warehouse locations for last mile delivery. With the “post-pandemic normal” coming into sight, what will drive commercial real estate and brokerage services activity in the months ahead?
COVID-19 & Commercial Real Estate
Among the significant shifts in the Chicago market during the pandemic has been the outward migration to the suburbs for housing and, on varying levels, office space. As the pandemic wore on in mid-2020, many urban dwellers looked to the suburbs for an expanded housing footprint and escape from the congestion. Similarly, some office tenants leased satellite space away from the city to help employees spread out in office campuses with multiple entrances, wide atriums, and plenty of outdoor space or single-story properties with private entryways, bathrooms, and kitchens. These satellite office alternatives provide an environment that is closer to home and more suitable for a pandemic environment.
These outward migration trends are being seen across many markets nationally. While these transitions were big topics of discussion in 2020, they had established roots long before the pandemic, with Millennials being well into the family formation life stage. The dynamic shifts due to the pandemic also exacerbated the phenomena of Baby Boomers, who are at the opposite end of that life cycle, early retirement relocations, not only driven by the pandemic, but more interestingly, a preference of, or need for, a rental lifestyle.
The surge in home buying has continued into 2021, pushing home sales up by 18 percent across the nine-county, metro Chicago area in January and February. And, there are signs that some of these patterns will stick around and fuel activity in the retail, restaurant, and related sectors in the post-pandemic world. Brokers who can support clients in aligning business plans with high growth consumer population centers and burgeoning downtown mixed-use areas will be well positioned in this environment. One example is the recent development and lease up of Central Park Place in Downtown Naperville, IL, boasting luxury condo living with new-to market retail concepts: Sweetwaters Tea & Coffee, The NOW, and James & Sons Fine Jewelers.
Among the other trends to watch for 2021 are:
- Flexibility in office space utilization — an important consideration as brokers’ work with commercial real estate tenants with evolving plans for in-person and hybrid work schedules.
- A continued surge in industrial space usage, which will require brokers to actively seek out niche suburban locations near transportation corridors that can support e-commerce.
- More reinvention in the retail sector as new concepts emerge and existing ones fine-tune their approach and prepare for a growth in consumer spending.