The unpredictability of the last two years has made us all wish we had a crystal ball to see where our industries are headed. The economic drag caused by the pandemic, lockdowns, business closures, and consumer fears has severely impacted many industries, yet everyone wants a return to normal.
As we recently learned from the airline industry and its spate of delayed and cancelled flights, travelers want to come back, but airlines are not so agile in restoring service: They must rebalance labor, cost of flights, and equipment with consumer demand.
In the commercial real estate sector, retail and hospitality are facing tremendous challenges trying to get back to pre-pandemic levels. Recovery takes time, and these sectors’ struggles are the strongest indicator that things will not magically get better in 2022—or even as soon as 2023.
So, what will happen? What I am hearing from my clients is that planning for 2022 and beyond will be about hedging against the effects of the continuing pandemic and the threat of rising inflation, while trying to appease evolving consumer preferences.
Here’s my predictions for three sectors in commercial real estate:
- Hotels will begin to bounce back as herd immunity increases and consumer fears around the pandemic continue to subside, but slumps are still anticipated due to COVID hospitalizations, mask regulations, and travel restrictions.
- Brands across the board allowed owners to push brand upgrades/PIP requirements for one to two years in response to the pandemic, so there is a delay in upgrades and hotel amenities.
- In response to supply and labor shortages and increasing inflation, national demand for products will drive up hotel prices and impact the customer experience in the coming years.
- Hotels in the U.S. may see a surge in occupancy as unvaccinated travelers, who are not allowed to travel internationally in many cases, must choose domestic destinations for now.
- As price pressure rises, luxury travelers may consider hotels with limited amenities to enjoy leisure travel.
- As grocery stores and restaurants pivoted to curbside pickup and more flexible options, demand has exploded. So, property owners are working to make their tenants successful with more marketing and overall traffic support.
- Many retail spaces will be reconfigured to become safer and more efficient at the point of sale.
- The Internet will become increasingly important in delivering products and services, so retailers will plan their consumer interface to be identical in look, feel, and efficiency at brick-and-mortar locations.
- Office locations that demand higher rents and charge for parking are likely to suffer in a climate where more companies are allowing workers to work remotely.
- The “work from anywhere” trend is not going away and has already impacted worker relocations to the suburbs and small towns as workers pursue better quality of life. Many do not want to return to commuting and have proven that a flexible work environment can be more efficient and productive.
- Yet, many workers benefit from mentorship and interactions with seasoned employees, making easy-to-change flex-spaces a rising trend. This hybridization will continue as more office and warehouse spaces combine into a new, popular form of commercial real estate.
What do the futures of each of these sectors share? The need for flexible solutions. All the moving parts of industries must be reviewed, recalibrated, and reimagined to accommodate an ever-shifting physical, cultural, and economic climate. In all cases, when there is change, there is opportunity.
Tanya Hart Little is the founder and president of Hart Advisors Group, a commercial loan consulting firm in Dallas. She can be reached at [email protected].