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The coronavirus pandemic has upended our lives — and that is an understatement, indeed. While it is too early to think of the days without confinement, we can nevertheless use our newly available time to think of what its lasting effect on urbanism and real estate will be, when all is said and done.
First, a few observations: This crisis is deeply challenging a lot of commonly held views on how to work and live and highlighting things we never really noticed. For instance, as we are urged to self-quarantine and minimize contact with others, we rapidly realize that having an in-unit washer/dryer is a necessity that the majority of Manhattan rental apartments do not feature. Similarly, how do we feel about elevators when we have to touch a button to reach our floor, knowing that it realistically cannot be sanitized each time a person travels up or down?
Certainly, the pandemic will lead to long-lasting value and social changes. I believe we will demand more of the apartments we live in in the future, and real estate developers will cater to popular wishes. All for the better of urbanism.
In addition, we are going to rethink how we want to care for our seniors and our elder relatives. In times of a threat to which they are the most vulnerable, and after such dramatic events as the deaths of 35 residents of a Kirkland, Washington, nursing home, we might want our loved ones closer to us and under our own care. This, along with other factors, could in the future lead to an increase in popularity of multigenerational housing, an “old Europe” way of life in which several generations of the same family live under one roof. As a general consequence, widespread adoption of multigenerational housing could lead our society to generally be more tightly knit.
On another note, one of the biggest real estate trends of the past several years might become one of the virus’s biggest casualties. That would be coworking in open-floor office areas, often shared by workers and companies, with flexible workstations. Indeed, open floor plans that sought to foster social interactions are now suspected facilitators of rapid disease spread. Already, a number of coworking companies have announced massive layoffs.
And despite the rise of work-from-home arrangements over the past several years, thanks in large part to technological advances, the current nationwide remote work experience is showing its limits. The shutdown of large parts of the economy aside, many workers can’t be as productive at home as in the office while their children are unable to go to their daycare, and they lack their desk setups, etc. And they are badly craving a formerly neglected aspect of the office: social interactions. I don’t believe we could move into a world where everyone works remotely and virtually. This is good news for office building owners or, generally speaking, for everyone who thought that eventually, all aspects of life could take place online.
The business side of real estate can be foreseen to dramatically evolve as well. The Federal Reserve’s response to support the economy is twice what it was during the global financial crisis of 2008. In an attempt to ward off a depression, it is taking measures to save the economy, including cutting interest rates to 0%, providing banks large-scale credit facilities, and purchasing bonds and debt securities in enormous quantities. Essentially, the Fed is becoming a de facto commercial bank.
For the first time, these purchases include commercial real estate debt — specifically, commercial mortgage-backed securities (CMBS). Logically, the post-crisis scenario looks just like more of the same, with unlimited Fed money pushing up all asset prices, and in particular hard asset prices in major metropolitan areas. More than ever, real estate seems to be a permanently low-yield business, especially when compounded with the internationalization of capital sources in the industry (real estate was mostly a local, entrepreneurial and domestic business until the end of the 20th century). Competition among investors for desirable real estate assets should only keep growing.
On a brighter note, the planet is benefitting. The reduction in business activity and pollution is providing the world a much-needed breath of fresh air. Dolphins and swans are reclaiming the crystal-clear canals of tourist-free Venice. As the global economy falters, carbon dioxide emissions will most likely decrease in tandem. No coordinated action between nations could have produced such a result, nor would that even have been seen as a realistic goal. The pandemic’s unintended climate consequence could provide a blueprint for how nations and private actors in the future come together to tackle climate change. This is good news for real property owners who have come under pressure recently to cut carbon emissions, which comes at a high cost. From here on, relationships with local governments could become less confrontational.
Every cloud has a silver lining. Once the threat of COVID-19 has subsided, humans will again adapt and thrive, and urbanism will grow from the experience. Let us hope for this day to come soon.