The “New Normal” May Revolutionize Commercial Real Estate

 

I was at the bank the other day, or rather I was outside the bank spaced six feet away from the other customers, waiting for a bank rep to come out and deem us worthy of entrance.  The ‘bank bouncer’, as I like to refer to this new breed of employee, determines whether you really need to go into the bank or if you could achieve your financial transaction online in which case you are shooed away.  This, of course, is all in the name of social distancing and flattening the curve.  So, understandable of course.  But a part of me wonders if this COVID-19 pandemic is playing right into the hands of not only banks, but other businesses.  You will recall of course that many businesses have for years been in the habit of reminding customers that what they are trying to do in person or over the phone can actually be done much more conveniently and efficiently online in the comfort of your own home and at a time of your own choosing.  In many cases, actually securing a phone number for customer service requires an effort similar to Frodo’s getting into Mordor.  I was trying to find a phone number for help with a computer printer the other day and was continuously redirected to e-mail, other websites or even live chat.  If by some miracle, you are actually able to procure a phone number, you are warned about the high volume of calls and generally made to feel like you have endangered lives by making a phone call, after which you will be put on hold to the accompaniment of music that has even been rejected by elevator soundtracks as too sadistic.  The wait can be half an hour or more, but it’s a pandemic so what else do you have to do if you have the time to call customer service in the first place?  The point is that most businesses discourage you from even phoning them.  This retreat from customer service started with we don’t wish to actually see you and has progressed to we don’t even want to talk to you.

 

Now what, you may well ask, does this rant about customer service have to do with commercial real estate? Well, over the past seven weeks, it has been suggested that getting back ‘to normal’ is something that may not happen for a long time, if ever.  Ontario is moving very cautiously and Prime Minister Trudeau has said that normal is a “long way off”.  There have also been rumblings that we may never totally replicate our pre-pandemic way of living.  This may be especially true in the area of commercial real estate.

 

There is no doubt that fragile small businesses such as restaurants will see many closings.  Even with government assistance, many restaurants and bars will not be able to survive the lockdown.  That means there will be an increase in supply of commercial real estate.  Great news for people looking to open up a small business, but how many people are able to open a small business now?  Certainly not businesses that rely on providing service to people in close quarters.

 

But the real paradigm shift may have been something that was happening slowly before the pandemic, but has now been accelerated by COVID-19.  This is the switch away from bricks and mortar to online platforms. Certainly, this was already underway in the retail sector.  But it is not just retail stores that will be rethinking the money they spend on renting physical space.  Now that many businesses have asked some of their employees to work exclusively online, they may be noting that the gap between productivity in the lockdown and productivity in a ‘normal’ business environment is rather slender.  It may be common for CEOs and Board Members to start asking the question ‘is it really worth it to rent as much space as we do?’.  If employees can meet regularly on Zoom or other online video conferencing apps, the thinking might go, then what is the necessity of providing them with their own office?  One or two multi-purpose rooms might be enough for a large firm that needs to physically meet with clients from time to time.  You can be certain that you will start to receive assurances from companies that while face to face experiences will always be important to them, safety and economic realities have forced their hand to reduce their real estate footprint.

 

So while the ‘new normal’ may not be such great tidings if you are a commercial realtor, it may actually present our communities with some new opportunities.  Perhaps the numerous malls that dot our landscape can be repurposed as homeless shelters, affordable housing, community centers or cultural/athletic facilities.  Perhaps with some zoning flexibility, office buildings can be transformed to student residences, artist’s colonies or designated spaces for refugees or victims of domestic abuse.  Ironically, companies’ enslavement to profit may force society to change the way they utilize spaces.

 

This may be part of a larger reinvention of cities as urban centres start to re-evaluate how much space is devoted to getting in and out to work and play, and how much space is dedicated to actual living.

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