The Future of Commercial Real Estate in a COVID-19 World

There’s no doubt that COVID-19 will affect the future of commercial real estate in New Jersey, but the question is to what degree? For many of us, the days of commuting into midtown Manhattan or to a New Jersey suburban office park for work seem like a lifetime ago, but what does the digitalization of the workforce mean for companies looking to lease office space?

“Office leasing is not dead in any way,” Timothy Greiner, executive managing director of JLL, said today at a Choose New Jersey webinar that explored COVID-19’s impact on the state’s commercial real estate market.

“We have been fortunate to see that the bigger deals still closed,” Greiner continued. “What has been common with a lot of [the transactions we are seeing] is they have been short term, temporary office commitments predominately close to executives’ homes who don’t want to commute into the city.” Short-term leases allow companies to see what a return to normalcy would look like two or three years down the road, and, in turn, afford themselves the ability to reassess.

“Companies don’t want to commit significant capital today in this environment,” Greiner said. “Nobody wants to make a 10- or 15-year commitment until they get a sense of where this ends up.” In terms of office occupancy, John Saraceno, president & CEO of ONYX, said that it will take some time to fully bounce back. “It is going to end up being at least a 12-month process. We are still in some degree of limited occupancy in office buildings pre-vaccine,” Saraceno said.

• - Where Will the Workforce End Up?

“The idea that the graduates of college today are going to work in the suburbs the rest of their lives and drive cars to work every day is [not something that I see happening],” Saraceno said. “Employees drive the decision-makers plans and decisions, and, provided we get past the moment, there will be a pivot back to urban environments that I think the younger populous will still adapt to and be a part of their lives.” Saraceno cites Facebook as an example of a company that is “leading the charge of telling people to work from home through the end of 2021, while at the same time signing an 800,000-square-foot, 15-year lease in New York City.”

“Students are going to do online classes from their apartments, and they are probably going to be great customers for the surrounding restaurants with takeout and outdoor dining”. “The one bright light that I have seen come out of this entire mess from a business standpoint is that every restaurateur that I have spoken to in New Brunswick has said this is the best summer that they have ever had. People don’t usually come to New Brunswick in the summer to have dinner, but with people not traveling far, this has been a unique result of a relatively trying situation.”

Topics: Real Estate Investment, Commercial Real Estate, COVID-19

Work cited: Jim Pytell, New Jersey Magzine, August 04, 2020

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