With many businesses shutting down and workplaces realizing that their employees can easily work from home, it seems that commercial real estate will most likely look quite a bit different moving forward.
Even with these not-so-hopeful indicators, there are some silver linings and positive signs on the horizon…
A Q&A With Deena Zimmerman
We took some time to sit down and chat with commercial real estate expert Deena Zimmerman about these issues. Deena is a Vice President and Advisor with SVN Chicago Commercial. While her speciality is retail, Deena is an experienced industry thought leader and has her finger on the pulse of various commercial market sectors.
The following is a question and answer session where Deena gives us her take on the current and future state of commercial real estate.
Hi Deena, can you give us an overview of how your market and clients are coping and pivoting right now?
Once a day someone asks me about the state of commercial real estate. I think it depends on the sector. I’m a retail specialist, but interestingly, I can tell you that multi-family is actually quite a stable asset. If you look at the statistics, about 94% of apartment renters, across the nation, are still paying their rents. Which means there isn’t as much rent relief going on as originally thought. I see plenty of my investor clients using the 1031 to exchange into multi-family units. Of course, on the other side of the spectrum, is hospitality and restaurants, and that’s just been devastating. Absolutely devastating.
There has been one bright spot in regards to restaurants though. The ones who, pre pandemic, had a robust, online delivery system such as GrubHub, Uber Eats, etc. They’ve pivoted really well, and some arguably, are doing better. I work with a lot of national food franchisees, QSR types, and some of these franchisees are seeing some of the best numbers they’ve ever seen.
How are your retail clients adapting their businesses during this COVID time?
The first sixty days of the pandemic, I spent a lot of time talking to all of my retailers, discussing things like applying for the PPP (Paycheck Protection Program), or the SBA (Small Business Administration) emergency grant loans that were available.
So that’s obviously a difficult situation, and I had quite a few tough phone calls and meetings. And I’ll be honest, some tears were shed. But there is a flip side. There are some businesses that have seen increases, such as grocery, convenience and liquor stores.
The cold, hard truth is that a lot of retailers prior to this, we’re already struggling. JCPenney, Pier 1, they were in the news long before this. But, I don’t think anyone is giving up on brick and mortar. People say “retail is dead!”, that it’s on its last gasp. No it’s not! There will be a demand for brick and mortar. It’s just going to look a little different moving forward.
The pandemic forced a reset. It’s forced commercial building owners to come up with a new plan B. I’m actually discussing joining a national council whose main objective will be to help figure out a plan on what to do with all this vacant, big box retail space. One of the ideas is that storage companies are going to occupy some of these spaces. In fact, good tip here: storage is a great investment area right now.
What activities are you doing to help your clients; how have you shifted?
Tracking trends and shifting my focus. You gotta keep up today like no other time in history. Things change and update by the hour. One of the trends I see is drive thru fast food; some of the cap rates are unreal. Large investors may want to pivot and diversify and acquire some fast food drive thru stores. Those are the kinds of things I wasn’t necessarily paying attention to before.
What are some apps or websites that you rely on right now to help your remote operations?
One of my goals last year, pre pandemic, was to be more active and present on social media, more videos, stuff on YouTube, etc. Well, the pandemic forced me to do it! Now I have all these really nicely produced videos that showcase the properties I’m representing. Now clients from out of town or out of state, who normally fly in to look at a space, can see it online on YouTube. I’m getting lots of attention from my videos. YouTube is my best friend now.