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Commercial Real Estate

Evan Stone: Lessons Learned And The Future Of The Commercial Real Estate Industry

The Goodwin Advisors managing partner returns to blogging for D CEO and talks about whether the office matters, bigger isn't always better, and washing your hands.
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I have been trying to decide what I wanted to write about in my first column in many years for D CEO. As I reflect upon this past year, it has been challenging on many levels as we look at old forgotten lessons and new ones that will shape our industry and personal lives well into the future.

While much has been written about working from home, the value of the office, and what happens to our industry from now on, I wanted to share my perspectives, too.  There are even some lessons our parents taught us—and have proven to be right. So, my key thoughts over the past year and what it means to many of us going forward are as follows:

Evan Stone, Goodwin Advisors

The office doesn’t matter – Everyone proved they could conduct their businesses from home, their parent’s house, their lake house, and even in a hotel room in Florida.  We are all now experts at creating a Zoom video conference call, connecting into foreign Wi-Fi networks, and making do with much less than we had back in our office. We now know when the next pandemic hits, or even the Zombie Apocalypse, we will be able to carry on in our business.

The office does matter – Yes, for most of us, our place of business does matter. Maybe even the vast majority of us, regardless of whether we want to admit it or not? We, human beings, are not solitary creatures, and many of us cannot wait to get back to our “sanctuary,” our desk, our colleagues, and the norm of our day-to-day activities of being “at work.” As much as we may not want to admit it, being at home and having too much time with our significant others, children, dogs, and distractions of our stuff was nice at first but eventually became too much of a good thing

For those that run businesses, manage people, and/or fuel innovation, we know it is much more effective to have meetings in person, talk one-to-one, and have impromptu strategy discussions. Yes, all this can be done over Zoom, but I have not heard from many people that feel this is a viable alternative.

Gateway cities matter a little bit less – Some of us escaped our homes and the big cities during the pandemic to the safety and slower pace of smaller towns, the countryside, and even longer stays at an Airbnb where we vacation. We proved our ability to operate remotely that we could sustain our businesses in non-Gateway markets, from secondary cities where we might have grown up to tiny hamlets—or virtually wherever we landed with our laptops and cell phones. We also proved that we did not need to be in our Silicon Valley campus or Park Avenue office tower to keep up our responsibilities. We could actually be just as effective from Bellingham, Dallas, New Orleans, Pittsburgh, or even St. Peterburg. We also found our colleagues could, as well. And many of us do not want to go back to New York City, San Francisco, or even London. Due to technology and quality of life, we could be productive and even happier in smaller and less crowded cities.

Many businesses have taken notice as well, largely due to the lower cost of doing business and pro-business governments in those states and cities, not to mention the decreased commuting times and lower cost of living for their employees.

If you are not shiny and new, you damn well better be shiny and renovated…or have a path to get there – While the story has not been fully written, to most market participants, it feels like many tenants want to upgrade their office space to new, newer, or renovated spaces. Businesses want to welcome back their employees to fresh or reconfigured spaces, or when their lease is up, they want to go to new and improved occupancies to continue attracting and retaining talent.

While this was a movement pre-COVID, now it is a clear sign to investors that if your property is dated and needs to be fully renovated—or just spruced up—you are at your own peril, not investing now. The downside of not being shiny and renovated could be much worse than the risk of investing in your building to position it for the future. Rents will rise more quickly for better properties.

Bigger is not always better – Clearly, some of the biggest firms got bigger during the pandemic, but we also saw numerous smaller firms move quickly and without hesitation. As we advance, the competitive landscape has changed in some sectors, with smaller firms that innovate and put the client first having brighter futures than those with record revenues. What is also clear is that more nimble companies can be just as effective as the global firms, maybe even more so. It will be exciting to see the competitive landscape change in various ways in the near future.

Life is fragile – We all have family, friends, and acquaintances that were sickened by the COVID virus and came through it unscathed. We all also know people that have continuing side effects, and some have even that died. While we initially enjoyed working from our homes, we all were positively reminded how much we love our families, friends and not having to commute. And that with the death toll that mounted nationally and worldwide, we all had an important reminder that life is fragile and is to be enjoyed—both at home and work.

Your mother was right – Everyone talks about the lack of a recent flu season, and most have gone flu-free this past year. Your mother was right – don’t forget to wash your hands!

Evan Stone is the Managing Partner of Goodwin Advisors, a boutique capital markets firm. 

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