Blog:https://www.southernrealtyspecialists.com/blog/45775/A+Historic+Rebound+For+The+Housing+Market%3F%21Title: COVID-19 Business Closures Shuffle Real Estate Demand Across CommunitiesThough real
COVID-19 Business Closures Shuffle Real Estate Demand Across Communities
Dated: January 20 2021
Title: COVID-19 Business Closures Shuffle Real Estate Demand Across Communities
Though real estate trends can vary by region, there is one constant that drives buyer interest and demand across the country: the surrounding area. Homebuyers look at not just a home, but also for what the surrounding area provides and what it adds to the lifestyle they are searching for. One-of-a-kind restaurants, retail stores, a favorite grocery store, and so on attract buyers to homes in an area. So, what happens to residential real estate when commercial businesses close, restaurants permanently shutter, and windows on one-of-a-kind community establishments are boarded up?
The hardest hit of all industries during the pandemic has been the restaurant industry, with over 100,000 restaurants across the country shuttered permanently. The loss of local eateries extends far beyond just having to drive a few blocks further to get a burger. Over 49% of agents cite restaurant closures as having the most negative impact on the desirability of certain neighborhoods. Two regions of the country that have experienced the largest and longest battle with COVID-19 have been the Northeast (New York) and Pacific (Washington and California). These areas have lost thousands of restaurants so it is no wonder that in these two areas over 54% of agents say local business closures have driven down interest in nearby residential real estate. Another entertainment driven business that suffered closures due to the pandemic is bars and nightlife. These businesses lend to the weekend and late night energy that so many cities such as New York City and Los Angeles offer locals. The loss of bars and nightclubs has negatively impacted demand for real estate in local neighborhoods for 7.3% of real estate agents surveyed.
Commercial office spaces were relatively deserted during the initial peak of COVID-19. Many companies experimented with work from home for the first time and quite a few have chosen to stick with it. Large tech companies have paved the way for work from home, and more than likely a large percentage of companies will decide to follow suit. Some estimate that remote work will take over the average workforce numbers by 2025. What does this mean for the residential real estate market? First, this does not help surrounding residential real estate that may have prospered due to booming commercial office space. In fact, commercial office closures, according to 18.2% of agents, have negatively impacted residential real estate. Should remote work remain a lasting trend, more homebuyers could start searching for their future home far from the cities they currently reside, in search of towns they prefer. This shift would fuel the existing tendency of homebuyers who are purchasing in suburban and small town areas rather than urban areas. As the trend toward suburban living continues, agents selling in urban centers will be harder pressed to find buyers that are willing to pay higher taxes and higher prices for perks that are available in less expensive suburban areas.
Common brand name stores such as GNC, Brooks Brothers, New York & Company, and Stein Mart all filed for Chapter 11 bankruptcy in 2020 and are downsizing the number of retail stores they are currently operating. These are just a few of the large name brands that finally met their downfall in 2020 and have added to the retail industry downturn. Retail commercial vacancy rates continue to rise and will reach 11% in 2021. In addition, urban and high-street retail was and continues to be negatively affected by the pandemic and the general move toward e-commerce shopping. While many small end shops close, new e-commerce warehouse fulfillment centers are opening. In 2020 alone Amazon established plans to open 1,000 distribution centers in suburban areas. Each of these centers would add thousands of jobs that could supplement the loss of employment that so many have experienced throughout the pandemic. The placement of Amazon warehouses furthers the drive to suburbs for young qualified individuals and puts even more pressure on urban areas to keep up with suburban growth.
During the initial wave of COVID-19, there was a great deal of hesitancy among sellers and a huge shift in large city real estate confidence. With vaccine rollout underway and the horizon in sight, Americans are ready to return to their lives. However, the landscape may be different. Many restaurants will not return and the retail industry will need to shift its model if it wants to compete in the long term with e-commerce. However, the trend toward suburban living will continue as well Americans desire to find quiet, warmer, and safe living.
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