CRE Post Covid-19: The Importance of People

Living in unprecedented circumstances has caused many to ponder what the future will hold. Covid-19 has not discriminated in its destruction of personal and professional normalcy. Around the globe, people have been forced inside to mitigate the spread, protect frontline caretakers, and ensure vital hospital systems have the resources needed to care for patients. Companies like Zoom and Microsoft have seen upticks in their videoconferencing and internal team communication platforms due to so many companies transitioning into a remote workforce. Property owners are now more focused on tenant rent relief than organizing tours, while also attempting to manage their teams remotely. In the short span of 6–8 weeks, commercial real estate (CRE) and for that matter, the entire world, has changed. While incredible issues remain, globally and in our own backyard, my comments specifically reflect on the current, and hopefully future, state of CRE.

Black swan events, financial crises, and spiking unemployment force people to reconsider risk not just professionally, but personally. Amazingly, Covid-19 is all three of things: a black swan event that caused a financial crisis ultimately resulting in spiking unemployment. For years, commercial real estate has enjoyed a boom. Living in Dallas, Texas, this boom is tangible as the population has swelled to well over 7.5M people (MSA) with corporate relocation announcements becoming a weekly occurrence. I remember the Dallas of my childhood — a city fueled mainly by banking and oil & gas with commercial development prevalent in pockets of the city, like Downtown, Las Colinas, and Uptown neighborhoods. Fast forward to 2020, Dallas boasts the second most Fortune 500 headquarters outside of New York with flourishing suburban development stretching miles outside the CBD. Real estate has ballooned with people seeking new housing developments far outside the city center and suburban commercial establishments growing like wildfire, making Dallas a top location for corporations and development. The past 10 years have been remarkable. And yet, all of this commercial growth lacks one thing currently, people.

For decades, people have flocked to commercial real estate for the risk reward nature of the business. Trammel Crow is a great early example of this in Dallas, while other iconic figures have created many of the most renowned buildings around the world. These assets, and the land they occupy, have long been seen as the holy grail of the industry. Property owners task brokers and managers with keeping these assets occupied and in great shape. Developers, investment managers, and owners have taken great risks and achieved the pinnacle of the industry. But what happens now in a world of social distancing, corporate occupiers embracing work from home, and a timid workforce not eager to crowd common areas? How will the commercial real estate change?

A technology enabled workforce is the future of CRE.

Commercial real estate has slowly adopted technology over the past decade and today ‘PropTech’ boasts more than 3500+ startups just in the United States. Venture investment in these companies rose from $725M in 2013 to above $9.6B in 2018. That is an astonishing jump over such a short period of time. There is a need and many companies are competing for traction, adoption, and attention in the industry. While startups rightfully focus on their end customer, the CRE industry cannot lose sight of the consumer. Coming out of college, I was befuddled by the lack of customer service and process in CRE and this was a major reason I founded Dottid. The consumer, in my case, is actually two different parties. On one hand, you have the property owner seeking to get a tenant in a building; they are not only the seller, but the risk taker at the core of the business. Conversely, you have an occupier, or tenant, seeking to move through a transaction process as the buyer. Both parties ultimately want the same thing — an occupied space.

This is where people play a fundamental role in the future of commercial real estate. Working in the post-Covid world will challenge all aspects of the CRE engine. For the first time, on a massive scale, occupiers will begin considering and implementing work from home strategies. Covid-19 showed companies they have options. Yes, the vast majority of companies will still occupy commercial space. But, if Covid has taught us anything, it is that connectors are not necessarily conference tables but rather, technology.

Office and retail spaces will become more spread out allowing for greater social distance. Adaptive re-use of space will not just be a phrase of the future, but likely insert itself in today’s CRE vocabulary. Overall, property owners will have to adapt, like everyone else, to the future of work and this is where people, process, and transparency are vital. Brokers will compete harder for fewer clients seeking to gain advantages through technology. Occupiers will want a seat at the virtual table. The future will be marked by property owners that enable their people to do great work by utilizing technology to promote further relational equity in the business, thus making the transaction process smarter, faster, and cheaper.

Commercial real estate has always been labeled by ‘square feet.’ This will not disappear, but rather it will be stronger because people will be at the center of this label, not just the physical assets. People will drive adoption of tools and techniques that promote efficiency and bring the industry together. Relationships are the bond that spur new developments, capital allocation, and risks in a ‘deal’ driven business. I look forward to a day when the people in this industry are spurred forward through the adoption of technology to push CRE to be all it can be.