Q1 2020 Office/Healthcare Market Report

Summary The first quarter of 2020 began strong with over 40 office/healthcare transactions completed by the NAI Maestas & Ward Office Team. The market notes the most reported transactions continue to be areas with a heavy concentration of tech related fields. While showings at available properties have slowed at the end of Q1 due to the novel coronavirus, there are still active Tenants/Buyers in the market seeking to lease and purchase commercial real estate. Transactions that were under contract are continuing to move forward and  close. In addition, there are active buyers in the market currently signing purchase agreements. The pandemic has stirred fears in the CRE office market about the long term impacts. While most experts agree that the economic recovery will begin once the social distancing restrictions are lifted, the event could catalyze cultural changes in the way businesses occupy office buildings. Three to four weeks ago, the focus was on business continuity and keeping buildings operational. Decision making was about what employees need to remain on-site, who would be granted access into the building and how property managers were involved. Now the focus is shifting to rent relief as mandate lock-downs continue across the county. This will then be followed by the re-entry into the office place once quarantine measures are slowly lifted. We can expect to see aspects of health and wellness integrated into the work environment, that may require more leasing space. Continued measures of social distancing and opportunities for employees to log in from home may result in a reduction of office space needs, which could have significant ramifications for the Office market. Although the look and feel of office space may change when businesses resume to normal, the office trend is expected to be driven quickly by changing work patterns that will favor decentralized work, co-working and short term leases, even in Class A spaces. Supply will most likely increase as some businesses may not weather the storm, however, the demand of office using firms will continue to rise as they are largely able to weather this disruption. Many firms have implemented successful work-from-home protocols, employee distancing strategies and flexible schedules which has allowed businesses to continue paying office rents and payroll. The coronavirus is likely to have a significant impact on the commercial real estate market in the coming quarter. While retail sectors will be immediately affected, followed by the office, there may be an opportunity for those who can quickly act. If it is possible to refinance, extend lines of credit, negotiate contracts or renew lines of credit, now is the time to do so in anticipation of possible need. Finally, if one has the capital, there undoubtedly will be buying opportunities. The future is unknown, but the ability to look ahead to spot both risks and opportunities can prove to be invaluable. To download the Office/Healthcare Market Report, click here