Changes and Trends in Real Estate Due to COVID-19
As it has in virtually every aspect of our lives, Covid-19 has drastically accelerated trends in the field of real estate that were emerging slowly before the pandemic, and has ushered in some brand-new changes as well. Our clients at Steeg Law are grappling with these trends and changes, and our documentation of their deals tries to help them achieve the flexibility that these times demand.
The following two articles highlight some of the key trends and changes brought about by Covid-19. The first article, from CNBC, points to a new development directly related to the pandemic – shorter lease terms on new leases, and the consequences and risks posed to both landlord and tenant by this change. The second article, from The New York Times, describes the acceleration of a trend that was already in existence, namely the shortened life span of commercial real estate buildings and the need for multiple adaptive reuses over the life of the building. The pandemic has caused building owners to anticipate even shorter life-spans for their buildings.
At Steeg Law, we have seen the documentation of real estate deals begin to anticipate and accommodate these changes and trends, and we believe that will continue for some time to come.
As store owners sign more short-term leases, landlords are taking a risky bet on the future of retail
By Lauren Thomas, CNBC, Feb. 26, 2021
“Retailers and their landlords are engaged in a high-stakes game of risk right now. And it will be a few years until we find out which party is on the winning side.
As thousands of retail leases come up for renewal, their duration is increasingly shrinking, as businesses grapple with an unpredictable future and look for ways to slash costs, stay flexible and maintain leverage over their landlords, even after the health crisis abates.”
As Buildings’ Life Spans Shrink, Developers Try to Adjust
By Kevin Williams, The New York Times, Feb. 23, 2021
“Industry experts are starting to take heed as disruptions from the pandemic and changing technological needs are hastening the demise of commercial real estate developments.”
As noted in this article, there are “concerns of many in the industry that the pandemic had accelerated trends that could shorten the lives of buildings. Consumer and worker needs are changing more quickly than they used to, driven by technology, shifting supply chains and expectations of greater amenities. Such rapid cycling has been common in retail and food service, but it is relatively new to commercial real estate.
This shortening shelf life has left architects, developers and investors in a conundrum: How do you build for today without becoming obsolete tomorrow?”
