“Everything is going to be different after this.”
It’s a sentiment I keep hearing over and over again. “This” refers to the COVID-19 crisis that is locking down entire countries, shutting businesses, and keeping us all six feet apart from one another.
The world is collectively feeling a sense of metathesiophobia — the fear of change. More specifically, the fear of what this new and different post-coronavirus landscape will look like and how these colossal shifts will affect the day-to-day activities of every individual.
I don’t have a crystal ball to quell these fears. But, as a professional in the NYC commercial and residential real estate space, I can speak to what the real estate world may potentially look like when this is all over.
The Great Telecommuting Experiment Finally Happened
The concept of telecommuting and a stay-at-home workforce has been an exciting topic of conversation for years, especially with the world becoming increasingly mobile and digital. Many small, startup companies managed to grow a thriving business using an entirely mobile workforce with no traditional or central office location.
Older companies were hesitant to adapt to the telecommuting model for two main reasons. First, they were guided by old school values that dictated that work can only be done in the office. Second, they already had the expansive office space required for a traditional, in-office workforce. There wasn’t a need or desire to experiment with a different working model.
With the coronavirus locking down offices and forcing businesses to adapt to a 100% mobile and at-home workforce, businesses have had no choice but to experiment with large scale telecommuting.
For the businesses that are thriving with a mobile workforce, it raises an interesting question: Why are we paying for huge office space when the majority of our crew can be productive at home? In other words, large companies realize that they may not need an equally-sized office space.
Perhaps, all they need is a hybrid office designed for meetings and collaborative efforts.
This may cause some significant ripples in the NYC commercial real estate space. Specifically, a decline in interest for traditional office spaces and an increased interest in collaborative meeting workspaces that have more amenities.
CRE Needs To Continue To Adapt To Needs Of TAMI Tenants
For over a decade now, a rising number of TAMI companies have been putting down their roots in New York City. This includes some of the world’s most recognizable names in the tech world. Facebook, Amazon, Google, Spotify, Salesforce and many other behemoths of the Digital Age have continued to expand their presence in New York City. Most recently, Amazon took over the Lord & Taylor building in Midtown for the cool price of $1.15 billion.
These mobile and tech-forward companies have a different set of demands for their office spaces compared to the more traditional businesses in the financial, insurance, real estate, and legal industries.
TAMI companies want modern, flexible, and open office spaces that are green, accommodating, and include a plethora of on-site amenities. In short, these companies place great importance on the health and comfort of their employees at work. They want spaces that are not only productive but also fun and encourage a healthy social environment for employees.
The devastating truth is that the longer New York City remains in lockdown, the more companies are going to have to close doors. Thus, an increasing number of vacancies in the commercial real estate space. TAMI companies will be the tenants that eventually fill these vacancies because they are the businesses that are familiar with working from a mobile setting. They are operating unimpeded during the lockdown.
The Residential Real Estate Side Of Things
Aside from offices and commercial real estate spaces, the residential side is also experiencing (and will continue to experience) several changes. The coronavirus has effectively put the market in a standstill.
Popular residential real estate sites, like Zillow, Trulia, and Redfin, experienced substantial dips in site traffic, as much as 40%. And, New York, in particular, saw a 70% drop in new listings of homes.
The good news is that these numbers are starting to turn around. With the initial shock of the shelter-in-place order over, people are beginning to resume normal-ish behaviors, which includes listing homes and viewing said listings.
This shows us that the demand for residential homes is still there. Now, we need the supply for homes to return to the market. It wasn’t that strong pre-COVID-19, to begin with. Spring was already looking like it would be an ultra-competitive homebuying season.
Truthfully, the residential market is harder to predict than the commercial one. We get new details every day about when the lockdown will end. Not to mention, cuts to interest rates and changes to mortgage forbearance and payment standards have also thrown the market into an unusual loop.
The best we can do is look at past pandemics and judge what effect these crises had on the housing markets. In most cases, there is little to suggest that home prices will change that much. However, it depends on the timeline of COVID-19’s end and the extent of the economic fallout that will be caused throughout the pandemic.
Manhattan’s Own Silicon Valley Paints Promising Picture For NYC’s Future
As those tech giants I mentioned earlier continue to expand their footprints in NYC, the vibe and culture of Manhattan start to feel like the New York version of Silicon Valley. The continued dedication by companies like Amazon and Google to establish solid footholds in the city suggests that these organizations believe in the bright future of New York.
While we may not know what is to come and there will undoubtedly be a period of limbo after the coronavirus crisis is officially declared finito, TAMI companies will continue to pour into the city in the hopes of riding the waves created by Google, Amazon, and others.
The typical New York City office will look different from what we’ve always pictured, as will the NYC residential real estate space. I welcome these changes because changes are opportunities, and every great New York City story starts with an opportunity!