In the 2020 Emerging Trends in Real Estate Survey released at the 2019 ULI Fall Meeting, respondents listed a pandemic as the least important issue of concern for the commercial real estate industry. Fast forward to now; what was once insignificant for land use professionals is now the critical issue that will shape real estate for the foreseeable future. COVID-19, coupled with the social unrest associated with the death of George Floyd, has disrupted the marketplace and societal constructs across the world. It’s safe to say 2020 will be one for the history books. And the question will be: How did we respond?
As the commonwealth moves forward with managing the pandemic, it’s hard to imagine the economy heading back to “normal” anytime soon. Many are even questioning if getting back to “normal” should be the goal. Is now the time for commercial real estate professionals to lean into the moment and reimagine the future of land use for the commonwealth? Three areas bear a closer look: the future of work, economic inequality, and the future of public space.
By late 2019, many workplaces supported remote work, work from home, and/or telecommuting, but few workplaces were truly virtual. When the coronavirus hit and only essential workers were allowed on the job in person, people were forced to work from home. This meant companies had to shift into virtual mode and rely on technology to recreate the work environment. It also meant reimagining the relationships they had with their employees. If this becomes the new normal, companies will have to weigh the value of a potentially more productive workforce – that doesn’t waste time commuting or driving to meetings – against the loss of corporate culture, personal connections, and professional relationships that result from the collaboration supported by an in-person office environment and the synergy that comes from physically putting people in a room together. Companies will also weigh the potential for significant savings in real estate costs that come with a smaller footprint.
Not only has a global pandemic disrupted CRE, addressing systemic inequity now has as well. George Floyd’s death tapped into the consciousness of America. Companies are re-evaluating their values and having conversations in the workplace they never had before. This is long overdue for CRE, which has an industry benefited from land-use policies that historically disadvantaged African American communities. Redlining, a federal policy enacted during FDR’s New Deal, had a tremendously negative impact on land values in American cities. The practice used color-coded maps to identify predominately African American neighborhoods as too risky to sell mortgages, and white neighborhoods as more desirable for approving loans. Even after the passage of the 1968 Fair Housing Act, and the 1977 Community Reinvestment Act banning discrimination based on someone’s race, redlining prevented black families from building wealth through homeownership. For years, investment in minority communities was discouraged. Today, areas once redlined are areas of opportunity for real estate investors. Going forward, commercial real estate and city leaders are in a unique position to foster real estate deals that address these systemic inequities and provide benefit to black communities.
The Public Realm
The pandemic’s damage to the hospitality, retail, and restaurant industry extends to the public realm – places like Newbury Street, where people go to interact, engage, meet, and create a great experience. In a pre-pandemic world, lifestyle and shopping centers were focused on enlivening the consumer experience so people would stay longer and spend more money. Business owners hosted family-friendly events, morning yoga sessions, pet photo shoots, and musical performances to bring huge crowds to their shopping districts. These kinds of programs are at odds with social distancing. We are witnessing a change to the face of retail shopping streets and centers. Not only are major brands going out of business, but those that remain are also struggling. Many customers don’t want to linger; they are picking up dinner to go. Others are sitting outside at tables 6 feet apart, but they’re not enjoying the experience they once did. What does this mean for our public realm? Unique retail and restaurant destinations often “make the place”, contributing much more to the liveliness of a mixed-use project than just a place to grab food or sundries. These shops and dining establishments add to the vitality of our neighborhoods and our cities. Empty storefronts detract from the vibrancy of a destination. Filling those empty storefronts and recreating viable retail districts once the pandemic passes won’t be easy.CRE will need to consider alternative uses for ground-floor retail and restaurant spaces that will generate vibrancy. That means getting creative in our placemaking efforts to expand beyond food and shopping. Where does art fit in? Where does fitness fit in? What other activities can create that liveliness we all crave? These are just a few of the challenges that will require the real estate, community, and neighborhood leaders to work together to support the foundational tenets of our most revered destinations. Success will rely on collaboration during one of the most volatile times in modern history. Now is the time to lean into this moment of change.
Manikka Bowman is the director of policy and outreach for ULI Boston/New England.
Sandi Silk is the senior vice president at Jefferson Apartment Group.