"Communal offices will see a comeback... However, it probably won’t happen quickly. There will be a period of time when much of our commercial real estate is empty. This is a real opportunity."
What's the opportunity for mortgage lenders given how the pandemic will impact real estate in our cities?
DENVER; Jan. 19, 2021 - Based on how the pandemic will impact real estate in our cities, mortgage lenders may have an opportunity. A recent survey from the Urban Land Institute (ULI) found that most companies and workers expect that remote work will become a permanent fixture of the workplace model. In the survey of 555 real estate professionals across the globe, 96% of respondents said that employees would continue to work from home. We’re moving into a new world with regard to commercial real estate.
Survey responses indicated the office would still be an important element of the working world. It just won’t be full of people anymore, which means companies won’t need as much space.
So, what’s going to happen to all of our office space? That is likely to depend, in large part, upon what happens to our cities.
The future of cities
It turns out plenty of people have been asking that question, including the producers of the Freakonomics Podcast. In October, Producer Zack Lapinski set author Stephen J. Dubner up with Nancy WU [sic], an economist at StreetEasy, a listings service owned by Zillow, to talk about New York City.
“Manhattan rental inventory as of July, there’s been 37,000 listings on the market. That is a 65 percent growth from last July. In Queens, there’s 6,600 listings on the market, and that’s a 26 percent increase from last July. So, inventory grew everywhere — when looking at the borough level — but it grew way more in Manhattan.”
According to information provided in the podcast, 250,000 New Yorkers have filed with the US Postal Service to change their address since March. That’s double what the city saw last year.
Home listings were up in the city as well, as New Yorkers prepared to leave the urban giant for second homes deemed safer from the virus, but they weren’t selling.
“In July, there’s been 37 percent fewer Manhattan homes that went into contracts than in the same month last year,” WU said. People are ready to sell, but buyers aren’t taking advantage of it.
Despite this, no one is betting that New York City will die. According to Harvard economist Ed Glaeser, “New York has reinvented itself over and over again in its 400-year history. But I think by the time we’re looking five years out, the city will have largely recovered, and we’ll be entering into the next chapter.”
Other cities in the US are expected to fare as well or better. McKinsey Global Institute researchers, writing in Foreign Policy magazine, wrote:
“It is America’s large cities, and particularly the broad swath of middleweights, that will be the key to the U.S. recovery and a key contributor to global growth in the next 15 years. Large cities in the United States will contribute more to global growth than the large cities of all other developed countries combined.”
So, the people will still be living there, but will they be working there?
A future for commercial real estate
People are social and while working from home served us very well during the pandemic, with some companies even seeing an increase in productivity, there are plenty of reasons to believe that communal offices will see a comeback.
First, humans are social and separation brings with it plenty of problems of its own. Depression spiked during the health crisis lockdown and antidepressants use was already alarmingly high.
In addition, there is plenty of synergy that results when workers are placed in close proximity to each other. The pandemic has revealed that in many industries, working remotely is very difficult.
However, it probably won’t happen quickly. There will be a period of time when much of our commercial real estate is empty. The pandemic's impact on real estate in our cities, this is a real opportunity.
The mortgage lending market will evolve and to capture growth successfully, lenders need to design their operations with flexibility and agility to respond.
The Mortgage Cadence Platform (MCP) is the future-proof loan origination system (LOS) that will enable lenders to come out ahead. To learn more, contact us today to schedule a live demo of MCP.
By Joe Camerieri, EVP, Client Account Management at Mortgage Cadence
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