Six months into the COVID-19 pandemic, nearly every facet of the American economy is feeling the impacts. The commercial real estate sector has been upended, too. Real estate professionals across all sectors have seen dramatic changes to investment strategies, tenant communications, and property management practices. Mixed-use properties are no different.
The Coronavirus pandemic’s effects on mixed-use properties are unique. As property owners and property managers struggle to adjust to this new normal, what can they expect in the coming months?
Mixed-Use Properties Pre-Pandemic
Before COVID-19 took hold in North America, mixed-use real estate was booming. As construction costs continued to rise, mixed-use investors pooled their collective resources to create one-stop commercial real estate centers. Mixed-use properties feature at least two asset types together in one space. For example, first-floor retail space with apartments above, or multifamily housing attached to office space.
Heading into 2020, mixed-use real estate was one of the fastest-growing design-build classes in the country. As more Americans chose to live, work, shop, and play in walkable downtown districts, the desire for all-encompassing communities grew to a fever pitch.
Then, the pandemic hit.
COVID-19 and Mixed-Use Properties
Health concerns related to Coronavirus have impacted all sectors of commercial real estate. Retail and office sectors remain the hardest hit. Office space has seen a decline in occupancy as well. Multifamily and industrial real estate are seemingly staying steady during the pandemic, but even these sectors are seeing declines in sales and leasing compared to last year.
Multifamily properties rely primarily on the allure of shopping and dining options within walking distance of home. However, with retail stores, restaurants, and bars highlighted as some of the most dangerous spots for Coronavirus transmission, these sectors are struggling.
Developers, investors, and property managers are scrambling to keep these properties functioning smoothly amid fears of virus spread. Currently, CDC guidelines recommend limiting group sizes and maintaining strict social distance to prevent the spread of disease. For restaurants and boutique retail shops, that’s nearly impossible.
Even with relief from the Congress-mandated CARES Act, many small businesses are struggling to make ends meet. If these businesses fail, then mixed-use properties will lose their competitive edge over the competition.
How Mixed-Use Properties Can Survive the Pandemic
Investors, property owners, and property managers of mixed-use properties are understandably anxious about the pandemic. However, there are several ways these professionals can protect both tenants and their customers while also encouraging business operations to continue.
Enact Coronavirus Prevention Guidelines
As a commercial real estate professional, you are responsible for keeping all tenants safe. During a pandemic, that means taking measures to prevent the spread of COVID-19. Mixed-use properties are complex because property managers must consider a variety of tenants, clients, and business operations.
Health and safety measures might include:
· Establishing clear guidelines about social distancing, hand hygiene practices, occupancy limits, and cleaning procedures for both residential and commercial properties.
· Communicating these guidelines clearly to both residential and commercial tenants and their customers.
· Increasing cleaning and sanitation practices throughout the building.
· Adding touch-free technology to doors, elevators, and other high-contact surfaces.
· Installing air purification systems specifically designed to mitigate the spread of the virus.
· Creating online communication portals that allow residential and commercial tenants to request maintenance, contact property management, or express other concerns.
· Adopt virtual tour technology to decrease in-person contact between property management and potential tenants.
Repurpose Retail and Office Space as Necessary
This is an unprecedented time, and CRE property managers should seek innovative solutions. If a mixed-use property experiences a vacancy, consider other uses for the space. Perhaps the empty storefront might become a Coronavirus command center for management staff. Or maybe the restaurant on the first floor wants to utilize vacant office space to increase their takeout and delivery offerings.
Property managers can rework entrances, common areas, and office spaces to increase the distance between individuals. You might also add hand sanitation stands throughout the property or advertise your increased safety measures to draw in potential tenants.
Finding creative solutions to an unparalleled problem will help your property survive the Coronavirus storm.
The Future of Mixed-Use Properties
No one knows what the future holds. Some projections suggest people will leave downtown areas and move into larger living spaces in the suburbs. Others predict renters will stay put, afraid to move into a new space and risk their health.
While we might not know the future of commercial real estate, we do know that some sectors are performing better than others. While hotels, retail centers, and offices are seeing increasing vacancies and lower rent prices, multifamily and industrial properties remain relatively strong throughout the country. Multifamily properties hold the advantage in commercial real estate because of their diversity. These properties feature multifamily, office, retail, and industrial spaces, often all in the same building. Therefore, if one sector underperforms, the others tend to compensate for these losses.
It may feel like multi-use property owners and property managers are feeling the squeeze from all sides. But in the end, the diversification may be the business’s saving grace.
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