Although the pandemic is causing massive economic disruption and putting numerous sectors in trouble, perhaps no industry is experiencing more significant challenges than hospitality. Consumers aren’t traveling anywhere near pre-COVID levels despite the lift of initial travel restrictions, putting a severe strain on businesses in this sector.
Most notably, the hotel industry is struggling, as vacancies remain higher than usual in most cities and don’t show signs of returning to pre-pandemic levels. The revenue per available hotel room decreased 50% between 2019 and 2020, and about 25% of all hotels in the country are at risk of foreclosure.
Here’s a look at what the future could hold for the hotel industry and how quickly it may recover once the majority of the population receives a vaccine.
The hotel industry depends on people traveling, of course. But a more in-depth analysis considers why people visit specific destinations.
Many Florida destinations run on tourism as visitors head to the beaches to enjoy the sun. But the central business district in Miami, for example, is far more reliant on business travel, whereas hotels near South Beach cater to the party crowd. As a result, different properties may recover at different rates.
Many companies still have the money to spend on travel. But will business travel completely bounce back in a rush to return to face-to-face meetings once restrictions lift? Or will continued employee reluctance and the newfound reliance on virtual conferences and saving on travel expenses endure?
On the other side of things, recreation may be durably impacted by nationwide job losses. Despite the public wanting to travel, the money might not be there for many aiming to do it. A broad economic recovery—including an unemployment rate near pre-pandemic levels—may be necessary to increase vacation spending dramatically.
One trend worth noting in the hotel industry is that luxury properties have experienced the most significant occupancy decreases.
This makes sense, given that travelers are more likely to opt for a luxury hotel on vacation than they are on business or when just passing through a city and stopping in for a night or two.
In May, luxury hotels were operating at 15% of capacity, compared to economy hotels at 40%. These numbers suggest that the clientele that economy hotels rely on, such as truck drivers and extended-stay guests, are still using hotels at significant levels. Tourists, on the other hand, are not. And these figures signal that the luxury hotel industry could take longer to fully recover.
Another factor to consider in the recovery is where a property is located. Hotels in large, fly-in cities like New York and San Francisco are harder hit than beachfront locations like Fort Lauderdale, Charleston, and Myrtle Beach.
The reason: large segments of the population can drive to Fort Lauderdale, Charleston, and Myrtle Beach to spend the weekend lounging on the beach. Destination cities were far more reliant on fly-in guests, and many people still avoid air travel because of COVID risk.
However, small, vacation-friendly cities with large urban populations within driving distance saw decent tourism numbers last summer. These properties could bounce back before air travel returns to pre-pandemic rates.
The hotel industry’s recovery could take many different forms, as much of it relies on how quickly the vaccine rollout occurs. There’s also the question of whether or not the vaccines will work against new COVID variants, as virus mutations have the potential to extend the pandemic—on some level—indefinitely.
Realistically, a full COVID recovery could take years. S&P Global Ratings put out a report in November suggesting that the downturn in U.S. lodging could last until 2023. There are many reasons for an extended recovery period, with the simplest being that many travelers may spend their money more carefully for some time.
It’ll also take some time for concerts, conventions, sporting events, and other mass gatherings to become normal again. Even with a vaccine, many individuals could remain hesitant to gather in crowds, staying close to home for the short term.
We don’t know when tourism and hospitality will fully recover. And some properties will never bounce back from the lost income. If the current downturn lasts until 2023, many more hotels will be forced out of business, a trend that could be particularly common with luxury hotels.
However, there is a reason for some optimism—the federal government plans to vaccinate 1.5 million people per day. This pace would see 150 million doses administrated by early May, taking the country significantly closer to the herd-immunity threshold. Those numbers could improve further as easier-to-distribute vaccines receive final approval, and a return to normal could be here by summer. Nevertheless, the hotel industry is undoubtedly in for more of a struggle.
Morris Southeast Group is closely following the economy and can offer insight into the hospitality sector and other CRE areas. You can contact us to learn more by calling 954.474.1776. You can also speak with Ken Morris directly at 954.240.4400 or email@example.com.
As Millennials start having children and wanting different things out of life, many find suburban living more appealing. This trend started before the global pandemic forced everyone to distance from one another, but there’s no denying that COVID has considerably sped up the process.
Today, many Millennials want to live away from the city’s bustle, in places they’re more likely to have a yard, access to parks, and good schools nearby. They’re also finding suburban properties more affordable.
At the same time, this generation wants shops, restaurants, and other essential services within an accessible distance. And soon, employers who set up offices in suburban neighborhoods could become more appealing, especially when people return to the office after the release of a successful vaccine.
The challenge is determining whether this movement from the cities is transitory or marks a lasting decentralization of the workforce. If it’s the latter, moving to a hub-and-spoke living and working environment could make suburban offices a far more valuable commodity.
Many factors are coming together and encouraging people to leave cities.
First, there’s the cost, as an apartment within the downtown area of a market like New York or Miami is prohibitively expensive. When buyers and renters can get far more living space at a lower price, suburban living becomes very appealing.
Living in the city is also a challenge because you’re unlikely to have any private outdoor areas. COVID has made this lack of space almost unbearable, forcing city-dwellers to either spend their time indoors or head to public outdoor areas and risk infection. The suburbs have yards and quiet streets, both of which are advantageous during a pandemic.
Buying in an urban area also involves far higher property taxes, despite owning less space. Millennials aren’t seeing value living in the city and are looking to stretch their real estate dollar a little further.
Of course, the current work-from-home opportunities are partially driving this trend. Those moving to the suburbs don’t have to worry about commuting because they’re working from home. However, we don’t know if these people will want to stay in the suburbs once they fight traffic on their way to a downtown office.
COVID-19 has brought numerous challenges for businesses of all sizes, not the least of which is keeping employees safe. For many companies, this means allowing workers to stay home.
Some companies, such as Microsoft, are turning work-from-home into a permanent solution. The company will allow most of its employees to stay home about 50% of the time post-COVID, with some individuals being eligible for full-time remote work with manager approval.
Microsoft’s headquarters are in Redmond, Washington, a suburb of Seattle, with other offices in smaller cities like Albany, New York, Bellevue, Washington, and Alpharetta, Georgia. The company also has a location in a suburban section of Austin, Texas, with its lone big-city urban office sitting in downtown Atlanta.
If the movement away from the cities continues, we could see more companies following Microsoft’s lead. More businesses may set up shop in less-populated cities and suburbs, allowing employees to work-from-home at least part-time.
If the workforce wants to remain in the suburbs, there’s a good chance commercial real estate values will follow the same trend. After all, the whole reason why many headquarters relocated to the cities in the first place was to attract Millennial talent that lived and played in those urban centers.
With a large percentage of the workforce now looking to escape the cities, it makes sense that companies would relocate again to give employees a shorter commute, which could potentially attract talent to their organizations.
There’s no telling if the move away from the metropolis is permanent. Once we have a safe and efficacious vaccine, individuals could realize that they miss the city and migrate back to the high-rises they abandoned in 2020. But they also may like the re-imagined suburbs, and permanent part-time-remote arrangements will mitigate the inconvenience of a long commute.
This trend creates an interesting CRE opportunity. A fundamental shift in the location and type of office space companies are looking for will, of course, impact the values of specific properties—and smart investors will be watching.
For more information on current CRE trends and the ever-changing market, call Morris Southeast Group at 954.474.1776. Ken Morris is also available directly at 954.240.4400 or by email at firstname.lastname@example.org.
COVID-19 is causing challenges in all walks of life, as everything from going to the grocery store to interacting with friends is different than it was this time last year. And as coronavirus cases increase across the country in a winter wave, we could see even more employees avoiding the commute and working from home.
But how long will it last?
There are some promising vaccines in the works. A collaborative effort between Pfizer and BioNTech and a shot produced by Moderna show excellent preliminary results, and the vaccines could start to be available before the end of the year.
However, there are significant supply limitations and logistical hurdles to overcome before seeing a roll-out to the masses. The pandemic is spiking again, and it’s going to get worse before it gets better. Still, we could see a return to “normalcy” as soon as the second quarter of 2021, with many people returning to the office before then.
Many workers want to return to the office, and offices will once again become a more in-demand commodity, albeit in a slightly different form.
Here’s one look at what we might expect regarding remote work, in-person work, and office space in the coming months.
Far more people are working from home than in pre-pandemic days, of course. A report by the Federal Reserve Bank of Dallas suggests that close to 50% of employees were working from home at least part of the time by August 2020.
The number of daily commuters has been increasing monthly since the first lockdowns, as we get more used to the new normal. However, it’s still nowhere near February’s numbers, when over 73% of employees commuted daily.
The average U.S. worker is now staying home 5.8 days per month, up from 2.4 before the pandemic. And those who occasionally telecommuted before COVID-19 are working from home for about 11.9 days each month.
What do these numbers mean?
In short, more people are working from home, and there is reason to believe that the trend will continue into 2021. There’s also a chance that the remote work revolution lasts—in part—indefinitely.
According to Gallup’s research, those who work from home for between one and four days each week are the most engaged and produce the best results.
Will managers notice this data and make changes to meet employee expectations? Maybe, which will lead to a durable shift in the way we use office space.
Those who own commercial property might see these numbers and worry about the future of their investments. Still, there will always be a need for office space, although we will likely see many companies seeking different things.
For example, many businesses may continue to allow employees to work from home on projects that don’t require collaboration. If a worker would otherwise be sitting in a cubicle or personal office without meeting with anyone, that’s a job that the individual could probably do remotely.
At the same time, there are many situations where face-to-face collaboration makes the process much easier. Some companies could begin looking for offices with large floor plans that make working together while socially distancing more accessible.
Class A office space will also focus more on specific amenities. KBS CEO Chuck Schreiber described these new demands well:
Now, we have the added element of preventing viral transmission, which is being achieved through changing office layouts; increased sanitation; installing barriers like plexiglass between workstations; adding antibacterial surfaces, like copper; erecting signage aimed at reducing crowding; and installing touchless technology to operate equipment in common areas, like elevators and appliances. This additional layer is expected to be a part of office development and operation for the foreseeable future.
Overall, companies will be looking to reduce the chance of airborne and surface COVID transmission in their office spaces in the immediate future. But we could see that trend continue to future-proof structures against novel illnesses in the coming years.
Companies will return to the offices, but they’ll want different things from landlords than before COVID-19. This pandemic has made it evident that we have to work to curb the spread of illness inside the workforce, and businesses will want to keep these practices up to reduce employee sick days and promote good health.
It’ll be up to property owners to adapt to the changing workspace by providing these organizations with the new elements they look for in class A office space.
Morris Southeast Group can assist as you evaluate adapting your office buildings to the new normal. We’ll provide solid advice to lower vacancy rates and attract businesses to your facilities while keeping in mind the capital availability to execute changes and the potential ROI. And if you are looking to lease space, we can find facilities that meet your workforce’s safety and volume needs—remote, in-person, or a likely mix of both.
Call us at 954.474.1776. You can also reach out directly to Ken Morris by phone at 954.240.4400 or via email at email@example.com.
Although the struggles of shopping malls and big-box stores aren’t new, as eCommerce has been cutting into their sales for years, the COVID-19 pandemic has been the final straw for many retailers.
Malls are struggling after having their anchor stores go out of business without other retailers to pick up the slack. Even big-name brands like Men’s Wearhouse, J.C. Penney, and J. Crew have filed for bankruptcy since the beginning of the pandemic.
Simultaneously, discount chains like Target, Wal-Mart, and Home Depot are thriving, as they provide the necessities at lower prices than many other retailers can match.
But what if a retail property doesn’t have a Wal-Mart or Target to help keep it afloat?
Developers and owners have to repurpose the space for another use. And the good news is that there are some emerging options to consider once we’re through the current crisis.
Traditional retail stores closing isn’t a new trend. It’s harder for certain companies to survive in a brick-and-mortar environment when online retailers can offer more selection and an ultra-convenient shopping experience. Many online shops also have significantly less overhead, allowing them to reduce their prices.
These changes in shopping patterns have led to various big-box spaces and malls closing their doors. But developers are turning some of these spaces into completely different entities.
For example, the Under Armour headquarters in Baltimore, Maryland, sits on a 58-acre site once home to a Sam’s Club and several other businesses.
Other reused big-box store examples include:
There are various examples of malls coming back with a new purpose, too:
There are numerous ways to repurpose former big-box stores and empty shopping malls, but the strategy might change a bit because of COVID-19.
We’re seeing less demand for corporate headquarters and other establishments that gather mass amounts of people because of the pandemic. With so much of the workforce currently operating remotely, there’s less need for larger office buildings. And some existing recreational facilities sit empty or at reduced capacity because people can’t be within six feet of each other.
So, what is the solution to these empty buildings?
It takes significant adaptation, but there are examples of commercial real estate owners repurposing empty malls, big-box stores, and other retail shops into indoor farms.
One such location is AeroFarms in Newark, New Jersey, which has indoor farms in buildings that were once steel mills, nightclubs, schools, and laser tag arenas. Today, AeroFarms operates the largest indoor vertical farm globally, producing food for people throughout the Newark area.
Another indoor farm, Wilder Fields, is currently under construction in a former Target store in Calumet City, Illinois. Once completed, it will have 24 separate rooms over its 135,000-square-foot space and produce enough crops to distribute to supermarkets and select restaurants in the area.
Medical marijuana is another crop that can thrive indoors, as is the case with a former JC Penney store at Copper Country Mall in Houghton, Michigan. The business plans to act as a dispensary that grows its products on-site in the abandoned store.
It’s also possible to turn these stores into fish farms, which are advantageous because their waste can feed other crops within the facility.
Central Detroit Christian Farm and Fishery took over a retail location from a food market and now operates an indoor fish farm featuring tilapia. The irrigation system pumps wastewater from the fish tanks to fertilize the on-site crops, creating an eco-friendly food source in a space otherwise sitting empty.
These examples of property owners reusing empty commercial buildings in creative ways provide hope for the post-pandemic world. The world is changing, but large spaces remain useful and can benefit society beyond their original purpose.
As we come out of the COVID-19 recession, some CRE sectors and buildings will fare worse than others—and various empty buildings won’t have enough tenants. Commercial real estate owners and developers will have to get creative if they wish to fill specific structures, especially as the virus’s course remains unclear.
If you’re struggling to decide on the next step for your retail property, Morris Southeast Group can help. We have our finger on the pulse of the commercial real estate environment and can assist as you adapt to the changing world.
Give us a call at 954.474.1776 for expert guidance. You can also reach Ken Morris directly by phone at 954.240.4400 or via email at firstname.lastname@example.org.
Over the past few months, we’ve written a lot about the impact COVID-19 has had on commercial real estate. In a short span, the landscape drastically changed—from commercial real estate (CRE) prospects to rent strategies to strategies for business survival.
Another area that has been affected is the role of tenant advisors. For many tenants, the reasons they chose an advisor in a pre-pandemic world have taken on an urgent and even essential character. And in some ways, tenant reps are uniquely positioned to help businesses manage a new normal characterized by new space requirements, issues, and opportunities.
When it comes to tenant broker/advisors, many people believe their sole purpose is to broker lease negotiations. In fact, there are many other benefits. But there is no denying that knowledge of comparable amenities and monthly rents, as well as keeping a wary eye out for hidden fees, lease pitfalls, concessions, and confusing language all come together to assist the tenant in achieving the best terms.
It’s common for a tenant to search for available properties on public websites. But these sources are only the tip of the CRE iceberg. A professional and well-seasoned tenant advisor, armed with local market experience and internal tools of the trade, will have greater access to properties, many of which will be better suited to your needs and price range.
Tenant reps, particularly those who are well-established, can recommend a team of experts to assist the tenant in turning a newly leased space into something that meets his or her needs. The importance of this service has grown as businesses must adapt structures to social-distancing requirements. Resources can include architects, designers, space-planning experts, air-quality companies and maintenance contractors.
In most cases, tenant rep fees—just like fees for the listing broker—are covered in the price of the leased space. In other words, landlords already expect that a tenant rep will be part of the process. In transactions without the involvement of a tenant advisor, the landlord’s leasing agent will just be paid more. When a tenant contracts with a qualified advisor, it’s an indication that they are serious about negotiating and will do so in good faith. And the advisor always maintains a constant focus on the tenant’s interests.
Ultimately, all of these benefits are tied to the current state of affairs, as COVID-19 has significantly changed the CRE equation. Just a few months ago, it was a landlord’s market. But quarantines have forced landlords and tenants, very often with the assistance of tenant reps, to renegotiate leases to keep both sides of the table afloat.
Now that the economy is re-opening and utilization requirements have changed, tenants have more leverage as landlords compete to fill vacancies with reliable income streams.
Tenants in South Florida are finding themselves in a unique position as they work to start new endeavors or save existing ones while navigating leases, re-opening phases, and the spike in new COVID-19 cases. The tenant advisory service at Morris Southeast Group can alleviate the stress of searching for the ideal space and negotiating lease terms, while helping businesses adapt to new requirements.
To learn more about what Morris Southeast Group can do for you now and in the future, call us at 954.474.1776. You can also reach Ken Morris directly at 954.240.4400 or via email at email@example.com.
Leave it to the Millennials. Regardless of the misplaced blame that generation receives, there’s no denying that they have single-handedly changed the real estate landscape as much as Boomers have.
Consider the urban downtown landscape, a space that was transformed by a live/work/play lifestyle that embraces walkability and experiences. With Millennial needs and developer visions coming together, city block after city block filled with residential towers, galleries, cafes, and coffeehouses.
There comes a time, though, when every generation grows up, and priorities change. For a generation of Millennials on the cusp of middle age, those changes have meant children, skyrocketing rents, and the realization that cities may not provide all that’s necessary—things like detached homes, private yards, and good schools.
In other words, suburbia.
In many ways, Millennial desires closely mimic those of the Boomers, the generation that grew up in the first suburbs. This new generation, though, isn’t exactly interested in their parents’ or grandparents’ suburban experience, first made popular in places like Levittown, NY. Instead, they’re looking for suburbia with an urban twist.
For developers, this trend is significant. Studies indicate that Millennials will form two million households per year for the next ten years. In Jacksonville, Orlando, and Tampa, for example, Millennials are the number-one new-home purchasers. Similarly, Miami, Miami Beach, and Fort Lauderdale are in the top 10 Florida communities with the largest increase in Millennials since 2010.
Just after World War II, when William Levitt devised his master plan for Levittown—“the prototypical American suburb”—one of its hallmarks was a town green. Located within easy walking distance to various neighborhoods, the spaces were reminiscent of the city neighborhoods from which new residents had come. They included greenery, a playground, and a strip mall with essential services, such as a laundromat and delicatessen. At some point, though, suburbs sprawled, and convenience felt farther away.
With the Millennial push for suburbia, developers are taking a look at the master plan for both new and established communities. Developers are examining how to create town centers that embrace the same live/work/play lifestyle that made city downtowns the place to be.
Desired tenants may include craft breweries, rooftop restaurants, cafes, retail, service businesses that present employment opportunities, shared workspaces, event venues, galleries, and pop-up opportunities to test market ideas. Another priority is businesses that provide Millennials ways to include their young families. A shared trait is that all of these areas should be easy to get to, and just as easy to get home from.
As with most things these days, there’s a pandemic factor. While COVID-19 isn’t responsible for the new interest in suburbia, it has certainly played a role in revving it up.
As metropolitan areas around the country were quarantined, wealthy residents fled the cities for their summer homes in the suburbs to escape contagion and claustrophobia. Many younger generations rented homes or moved back into the suburban houses in which they were raised. In the suburbs, it was simply easier to be socially distant and still get outside, even if that outside was a private yard.
Offices are also looking at the suburban landscape in response to COVID-19. CDC re-opening guidelines suggest employees commute alone and that businesses restrict the use of elevators—two concepts that don’t gel with working in an urban high-rise. For some companies, relocating to properties outside of the city center may make it easier to manage risk.
It’s important to remember that this isn’t a one-size-fits-all American Dream. The span of Millennial ages runs from 24 to 40 years of age. That’s at least two to three different life stage brackets and an income span that’s just as wide.
While some Millennials may be looking in more affluent suburbs, others are opting for more affordable options. In either case, developers have been presented with an opportunity to look beyond metropolitan centers—and this may be one element of a post-COVID world.
To learn more about what Morris Southeast Group can do for you now and in the future, call us at 954.474.1776. You can also reach Ken Morris directly at 954.240.4400 or via email at firstname.lastname@example.org.
Green commercial building is something thatb s catching throughout the country b no surprise considering the fact that more businesses are becoming more aware of the impact that they have on the environment. Green construction is especially prominent in South Florida, where Miami is one of the top cities for green commercial buildings.
According to a recent study conducted by Maastrict University in conjunction with the CBRE Group, Miami ranked ninth in the country for green commercial construction, with an impressive 19.4 percent of its commercial real estate having been certified as green. There are a total of 79 buildings in Miami with a total of 21 million square feet of office space that have either been approved by Energy Star or have received U.S. Green Building Council LEED certification.
Miami has fully committed to green construction, as evidenced by its municipal code, which requires all new private development consisting of more than 50,000 square feed to achieve a LEED silver certification.
As a South Florida business looking for new office space, be sure to look for buildings certified as being green. For more information about office space in the area, be sure to contact us at Morris Southeast today.
One of the most effective ways to ensure that your employees are productive is to make sure that they are living a balanced life, both at the office and at home. The happier they are, the more productive they will be. The following are a few tips to improve employee happiness and, therefore, their productivity.
Create a positive culture b Great office culture results in a more motivating environment. In fact, many applicants are willing to take a 7% salary cut if they believe the office culture is a good fit for them.
These are just a few tips for providing your employees with a better life balance.B B ContactB B us at Morris Southeast for advice on designing your office in South Florida.
Most people think that putting up a few plants around the office is just a way to make the space look nicer. While plants do help improve the interior design of any space, thereb s much more to using plants in the office than just as dC)cor. Plants can actually help improve the health of your employees as well as increase their productivity.
First of all, plants help to make the office much healthier. Plants remove around 87 percent of the toxins in the air within 24 hours.
They also help to establish a humidity level that matches the human comfort range of 30 to 60 percent. This affects your employees in a number of ways. First of all, a healthier environment means fewer sick workers. Studies show that absenteeism is reduced form 15 percent to 5 percent.
Secondly, a number of studies have shown that productivity improves as well. For example, 15 percent more ideas are generated by individuals working in an office that has plants.
These are just some of the reasons why you should use plants in the offices of your South Florida business. Contact us at Morris Southeast Group for additional South Florida business advice.
In the past, office spaces were designed to be efficient, even if that meant making them a bit dull and unexciting for employees. However, many business owners have now realized that a cheery workplace can actually make employees more productive and functional instead of wasting time. Use these tips to make your office a more cheerful place that employees will actually enjoy during the work day.
Contact Morris Southeast for more information on finding the perfect office space for your business and employees.