Without a doubt the pandemic hasupended commercial real estate. What were once solid tenants andasset classes have been thrown into doubt as social distancing hasforced people to remain at home. In response, newpractices—such as a permanent shift to remotework—once seen as unlikely are now being seriouslycontemplated by many companies. Up is now down, down is now up andso on. 

But executives at RCLCO caution the CRE community not to maketoo many assumptions based on what is happening at this moment asthe nation continues to respond to Covid-19. In a recent webinar,they took a look at the myths that have emerged about thecommercial real estate industry as a result of the coronavirus.

The Myth

The steady shrinking footprint ofapartment units over the past ten years is now over. 'Everyone'recognizes the need for space. 

The Reality

Larger apartments may indeedbecome a trend among some renters but it is too soon to call thistheory a trend yet, said managing director Erin Talkington. "It istricky to decide how many people will make that decision right now.Not many people are moving at the moment and there are some goodquestions about how it is not so much the actual square footagethat matters but how you use it." It is possible, she added, thatwhat this really will be is a trend about layouts, such as fittingan office space in a studio apartment. 

Talkington believes the trend ofsmaller apartment units is not over, as there is still a fairlylarge population of singles as well as people bunking withroommates. For the latter group, she said, "maybe working ina  studio apartment might sound lovely right now. It couldrepresent more space or different types of space."

The Myth

People are fleeing densitybecause of the pandemic. In high density areas people are havingnegative experiences and are flocking to the suburbs. The urbanareas will fall out of favor as people seek out more comfortablespaces to quarantine. 

The Reality

Here again, behavioral changesare difficult to predict, said managing director Todd LaRue. But inthis case the trend was already set in motion before the pandemicbegan. "The truth is a lot of this movement to suburbs was occurring pre-Covid anddemographics were driving that trend. What I think is happening is that Covid-19 isaccelerating trends that were already underway." It is clear thathome buyers are snapping up houses, driven by the current ultra-lowmortgage rates and many of these houses are in the suburbs. ButLaRue makes the case that this is a natural tendency that has beenunderway for years and it will continue for at least anotherdecade. In other words, when the pandemic is tamed, there won't bea reversal. 

TheMyth 

Office users will need less spaceas their employees continue to work from home. Office demand willlessen as fewer employees work full time in the office.

The Reality

This question of future officedemand, of course, is being debated fiercely in the CRE communityright now and there are good points to be made for bothsides.  RCLCOprincipal Rick Pollack weighs inwith an overlooked observation that Millennials and youngergenerations are having a harder time working at home as many areliving in or sharing small apartments. There are also socialaspects of an in-office experience that are difficult to replicatevirtually.