The COVID-19 pandemic has caused significant worry and confusion for a variety of commercial markets, including retail and other commercial real estate. As individuals and organizations brace themselves for continuing developments and try to figure out their short-term and long-term critical strategies, I would like to voice my own thoughts, impressions, and expectations regarding the pandemic and post-pandemic commercial real estate challenges.
Changes in the Retail Environment
Of course, the biggest and most obvious change in the commercial retail landscape involves the partial shuttering of many businesses in industries such as food service and hospitality. Each state sets its own regulations and restrictions in terms of the size of public gatherings, maximum number of in-person customers (or percentage of facility volume), and other measures aimed at reducing the spread of disease. Many businesses have also shortened their store hours, often having to lay staff off as a result. Facilities must pay close attention to these ever-evolving situations and make sure that they are in compliance with the law to avoid fines or closings.
On the federal level, businesses and individuals received some good news in the form of tax relief, including the postponement of the usual April 15th filing deadline. However, any change in tax law is something that requires careful scrutiny and understanding on the part of businesses and their attorneys.
People Still Need Real Estate
Even with the changes brought about by COVID-19, real estate companies will continue to find an ongoing demand for their properties and services. For one thing, demand may actually outstrip supply. Arizona commercial developers learned a painful but important lesson from the 2007-2008 economic downtown. Ever since that time, they’ve worked to move away from the boom-and-bust speculative building trends of the past, building at a rate better equipped to withstand future crises. Even if some businesses have closed down, others will continue to need retail spaces.
Individuals need real estate too, pandemic or no pandemic. Newcomers continue to flood into Arizona, especially from business-hostile states like California. These pro-business individuals will want to set up new commercial and retail spaces for their enterprises. The exact nature of the demand may change, but the demand itself will always be there.
Online Retail vs. Brick-and-Mortar Retail
As more and more people discover the convenience and relative safety of shopping from home via the Internet, the question arises as to how this shift might affect Arizona retailers’ real estate strategies. The reality is that different types of businesses will adopt different approaches to this issue.
Large companies that maintain vital online presences as well as substantial brick-and-mortar stores may find that they don’t need the 20,000 square feet that they once did. They do, however, need to maintain smaller spaces with enough products on display to give their shoppers the “last mile” of the shopping experience. Ordering a piece of clothing or technology online is, for many, no substitute for actually trying on the product or looking it over in person. This means that real estate will still serve a key role in converting shoppers into buyers.
Other businesses have always cultivated more of a personalized niche ambience and audience than the big-box retailers. For these boutiques, the in-store experience will continue to prove just as essential as always, if their hours of operation or maximum customer traffic must be temporarily curtailed.
For any trailer, adaption is the name of the game — not just during an externally-imposed crisis, but as a general rule for success. I would advise retailers not to get so set in their ways that they cannot swim with the tide.
For more thoughts on COVID – 19 and what it means for business click HERE.
© 2020 Matthew W. Harrison and Harrison Law, PLLC All Rights Reserved
This website and article have been prepared by Harrison Law, PLLC for informational purposes only and does not, and is not intended to, constitute legal or financial advice. The information is not provided in the course of an attorney-client relationship and is not intended to substitute for legal advice from an attorney licensed in your jurisdiction.
