A commercial real estate property is an asset that generates income for its owners. The property offers favorable returns over a long time. It benefits the owners with consistent monthly rental income and adds value to the total investment portfolio. The process of commercial real estate appraisal determines the current or market value of a commercial property which in turn helps seek financing, insurance, purchase, or sale deals.
Commercial real estate investments have earned solid returns in the past. Unfortunately, these gains have dissipated due to the Covid-19 pandemic. Clients choose to move out of office spaces they no longer afford to save on rental costs as employees work remotely. Whereas there is some semblance of a return to normalcy, it will take time, and companies worldwide will have to adapt to new business models to survive the post coronavirus era.
This trend has been long in the works as the past decade will show, with brick and mortar businesses switching to digital platforms. Global brands have set up massive distribution centers across the continent to serve an ever-growing internet consumer base. Notably, the near-collapse of coworking spaces company WeWork has cast doubt over flexible working spaces options that the sector had started to acclimatize.
With global travel at less than 50%, short-term stays companies will continue to struggle in the foreseeable future casting further doubts on investments in real estate startups such as Common, Quarters, and Ollie. Deloitte projects that economic activity across Europe, large Asia-pacific economies, e.g., Japan and Australia, India, United States, and China, will face a severe downturn if the coronavirus vaccination is not practical. As it will take time to develop enough vaccines and deploy them, economists expect growth to remain constrained for a long time. Nonetheless, the economy will recover. The critical question for Commercial Real Estate owners is whether CRE companies are ready for the future.
By tapping into tenant data, commercial real estate companies will become more resilient. IoT sensors collect proprietary information about the behavior of users in multiple real estate properties. This data provides a valuable commodity that could help technological and marketing companies build trust and increase user engagement. These observed trends are bound to take commercial real estate to a whole new competitive phase.