How Office, Retail and Hospitality Can Reposition As COVID Wanes
If COVID is less deadly and less restrictions need to be in place, that is an important shift in thinking.
As COVID cases ramp down, the outlooks for office, hotel, and retail are on the rise.
But “there’s an important change happening,” says Marcus & Millichap’s John Chang. “I’m hearing the word ‘endemic’ being used more frequently.”
And if COVID is in fact less deadly and less restrictions need to be in place, “that is an important shift in thinking, a trigger point,” Chang says. “If COVID is considered endemic, that implies government restrictions will be reduced and people will finally begin to get back to normal.”
That change is already manifesting across a variety of sectors: air travel is a mere 8% below pre-pandemic norms, and hotel occupancy rates are “nearly back in alignment” with pre-COVID numbers. A deeper dive into the data, Chang says, shows that limited service hotels are ahead of pre-pandemic occupancy rates. Full service hotels are still falling short as business travel struggles to rebound, but “If we do get to the point where COVID is endemic, full service hotels could gain momentum.”
A rising percentage of employees are also returning to the office, though still below the most recent peak of last December between the Delta and Omicron waves. Chang says absent another wave of new COVID infections, we’ll “finally’ begin to see how the future of office demand plays out.
Chang also predicts the demand for retail space could accelerate, especially for experiential concepts and gyms, restaurants, and movie theaters.
“Hope springs eternal,” Chang says. “And I’m pretty optimistic about the possibility of getting through this pandemic and getting back to business. That will bring a lot of properties that investors have been cautious about, like offices and retail centers, back into the mainstream. It’s simply a matter of time.”