The 'Limited Attention Span' Quarterly Market Review

We here at WT have held our breath more than once since March. And from where we sit, looking at our pretty pie charts, we surmise simply (though not very eloquently) that a) the world in which we have existed in since March is not normal, and more importantly b) this is not the new normal.  While we are down (tenant rental payments fell 3% this month), we are not out, and feel confident that we will return to a real estate environment that restores our fundamentals, which include things like tenants paying rent, banks lending money and more than two people allowed in the elevator.

Like many industries, both our professional and personal lives have been deeply impacted (code for turned upside down). It makes little sense for us to try to list these changes, because universally we have experienced them together … Hello 12th Zoom meeting of the day, while working at the dining room table (unless its closet-time because a 12 year old is having Zoom Lacrosse practice in the living room). 

Impacts to commercial real estate are predominantly those trends we were already firmly acquainted with. Retail, as much as we want to cling to the notion that nifty pop-up shops with the bergamot soap and leather writing journals are going to save us, were already shifting to dark. The pandemic simply ushered in the demise more swiftly. Industrial, the counterforce to the bleak retail landscape saw pressure continue to rise to supply adequate space to allow faster and cheaper deliveries of everything from dog food to mattresses. Offices were already seeing non-traditional approaches to use.  Operationally, 10am was becoming the new 8am in many progressive companies. And in response, building owners were already being forced to pivot operations that were outside of traditional office where security could punch out by 6. Workspaces were also shifting to embrace social spaces, and while those spaces are now cordoned off with what looks like crime-scene tape, we think the draw of free snacks and gourmet coffee will bring us back from our fridge at home filled with last night’s leftovers. Self-Storage is also going to continue to proliferate.  What the toilet paper debacle of 2020 taught us is people store things in response to a primal desire to save for the future. Think squirrels with nuts. Multifamily continues to advance, because at the end of the day, people need a place to live.

So, what happens next?  Retail is going to continue to pivot to those who can ‘retail’ while providing either a service or experience.  We do not think office is dead.  WT expects the use of office will come back in the summer. Communal spaces will continue to be desired, albeit with lots of hand sanitizer.  Humans are social creatures by nature, and when allowable, we predict we will again gravitate to social spaces for work. Our demand for delivery of anything we want will continue to drive logistics and warehousing, which will feed the need for self-storage for all things we order but cannot use, along with grandma’s dining set that we can’t bear to get rid of (though we wouldn’t be caught dead with it in our dining room). On the housing side, we agree that ‘for sale’ housing products will receive a boost from flight to security and low interest rates. We predict multifamily housing will increase in the suburbs, not out of fear of cities, but resulting from the combination of being priced out of urban environments, with the ability to work from home, with the underlying advantage that suburbanites can now get all the grain bowls, naked yoga (maybe not everywhere yet), and dog spas previously limited to cities.

Stay healthy. We miss you, world.

WT