There’s a lot of speculation about how the novel coronavirus will impact your business, but according to a recent webinar by RCLCO Real Estate Advisors, there are quite a few myths mixed into reality. In the presentation put on last week by the real estate advisory firm, RCLCO senior leaders disclosed valuable facts about ubiquitous real estate myths stemming from the global pandemic. Here are the myths they identified:
Myth: The small (and constantly shrinking) apartment is over.
The idea here is that, in the age of COVID-19, more people recognize the need for space.
- Debunked: RCLCO predicted that we will continue to see small unit sizes. Here’s why:
- Not a lot of people are moving right now.
- Erin Talkington, managing director of RCLCO’s real estate economics practice, noted that it might be more about the layout than the size of units. “Renters don’t need a large apartment; you can fit an office in your studio apartment and work from home,” she said.
- Small apartments would certainly appeal to the 31% of multifamily renter households with roommates, because working from home alone in a single apartment may be preferable over sharing space.
- Though the appetite for smaller spaces isn’t necessarily over, RCLCO’s experts did note that, logistically, the smallest apartments cannot get too much smaller.
Myth: People are fleeing density because of the pandemic.
The assumption here is that urban areas are being experienced in negative ways, which will cause Americans to move to the suburbs.
- Debunked: The trend of moving to the suburbs was already occurring prior to COVID-19, and is not necessarily a reflection of the current crisis. Here’s why:
- Americans are seeking more space for functionality reasons, not as a rejection of density.
- It seems that COVID-19 may simply be accelerating moves that were already underway.
- It’s demographics — not the pandemic — that are driving much of the outward traffic. RCLCO Managing Director Todd LaRue noted that, between ages 34 and 46 is when “there are houses with kids at home, and there is a surge in that age group in 2030 millennial households.”
Myth: As more employees work from home, demand will decrease for the office market.
- Debunked: Many employees will prefer to work from home, but companies will use the same amount of space as they used to. Here’s why:
- This is also a preexisting trend; average square footage per employee has declined for years.
- Employees will want to come to the office. Those who work from home report more distractions, resulting in less productivity and job satisfaction.
- Employers will want employees to come into the office, not just for work, but to help build company culture.
- When employees come in, they probably won’t use temporary solutions because “hoteling” or “hot-desking” can spread more germs, while going into a regular office space gives them more control over the cleanliness of their space.
Myth: Manufacturing will return to the U.S.
As a result of COVID-19-related supply-chain issues and mounting political and economic tension with China, many U.S. companies will begin manufacturing locally again.
- Debunked: This will not occur because firms are motivated by profits and the cost of manufacturing in the U.S. is higher than elsewhere in the world.
- This is also part of an existing trend; a greater amount of goods has been manufactured offshore for the last 20 years.
- More stringent regulations in the U.S. create a more challenging environment for manufacturing.
- Manufacturing in China will be diminished because of their increasing cost of labor, and therefore goods will be moved to other countries excluding the U.S.
Myth: Residential sales and marketing will return to pre-COVID-19 crisis practices.
Homebuyers will go back to primarily in-person shopping, and the use of community information centers will return to the multifamily market after the pandemic.
- Debunked: In fact, real estate professionals will continue to rely heavily on online resources and webchats rather than in-person showings of homes. Here’s why:
- The home-search experience was already broken, and adapting to social distancing regulations has made the experience very convenient, according to Gregg Logan, managing director with RCLCO. “They can get so much more info online. If they want to talk with someone, communities can message renters through the chat function.”
- Matterport virtual tours allow the user to do a 3D walk-through on their device and experience a floor plan in full virtual reality, which is relatively comparable to looking at homes in real life.
- Builders and developers may fall behind if they do not embrace virtual technology and other online tools.