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Impending Commercial Real Estate Problems

Impending Commercial Real Estate Problems

Current issues in commercial real estate and the impending commercial real estate problems.

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Current issues in commercial real estate and the impending commercial real estate problems

The topline thesis that I have is that real estate is going to look very different in 10 years. Over the next 10 years we’ll see a boom in mixed use spaces.

Here are five reasons why this this will happen.

1. Landlords are taking their tenants to court over unpaid rent.

Gap, PetSmart, and the NBA are all being sued by their landlords for not paying rent according to the New York Times. In one particular case, Simon Property Group is suing Gap for 66 million dollars in unpaid rent.

2. Businesses are starting to work from home.

Notable leaders doing this are Facebook and Google, who both announced that employees are able to work from home either permanently or to the end of 2020. In Facebook’s case it’s permanent. Other companies that do this are Twitter, Square, Shopify, Coinbase, and Upwork.

3. Anecdotally commercial lease deals coming up for renewal are not being renewed. Commercial brokers are offering to haggle with landlords on existing deals. Everything is up for grabs in this new economy.

4. Employees want to work from home.

Our company has worked from this model, since 2013. We’ve done this because I didn’t want to deal with LA traffic. The outcome is that our people work harder, we don’t spend time in needless meetings, and we get more time with our families. In a Forbes article Kate Lister, president of Global Workplace Analytics said “77% of the workforce say they want to work from home at least weekly when the pandemic is over.

5. What happens to work that can’t be done from home?

That’s where mixed use buildings come into play. Shopify, the Ottawa based company with 16 offices worldwide said they are re-thinking their floor plans, redesigning conference rooms, and creating work stations. The purpose of their offices will not be day to day work, but rather as a gathering place when needed. This is the future of commercial space.

6. Who are best to win at this new model?

Existing companies who have created the shared work space industry: companies including WeWork, Regus, and their many smaller competitors. This presents an opportunity for WeWork to come out as the leader in the new commercial space. Imagine WeWork as the grand-daddy business that either consults on how to operate these spaces, or provides companies like Shopify with additional revenue when their 16 office spaces aren’t being used.

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