PORTAGE — The COVID-19 pandemic has accelerated a series of changes that could fundamentally shift the commercial real estate market in the months ahead.
That’s according to Rick DeKam, principal of Midwest Realty Group LLC, a Portage-based commercial real estate brokerage, development and property management firm.
In particular, DeKam cites the influence of technology on how businesses operate and what their space needs will be in the future, as well as the effects it has had on the retail sector.
“Our society is constantly evolving with technology,” he said. “What (the pandemic and shutdown) did was it helped all of us realize that, with the technology that we already have, we were able to implement it more, to lean on it greater and continue to stay open even though we were all at home. It’s helped all of us realize a number of things that we really weren’t embracing prior to this.”
Companies that never had a remote workforce transformed their business model overnight and “are in many cases finding to some degree that they’re more effective working remotely,” DeKam said.
“I’m concerned about that because I think it’s going to fundamentally change office space and office requirements,” he said.
As a small company, Midwest Realty has been managing through the pandemic without any major issues, DeKam said. Before the state-mandated shutdown, the company was working through a number of transactions and didn’t miss a beat on closings with the new tools allowing for the broader use of electronic signatures and online notarization.
But in the wake of the closures, he’s seen most new brokerage activity grind to a halt.
“Most people are trying to figure out how to adjust to the new normal versus expanding,” DeKam said. “There were people before the shutdown that we were talking to about expansions and additional locations that are at this point talking to me about closing. It’s been a complete reversal.”
As well, the firm has experienced some tenants having difficulty paying their rent, but more concerning for DeKam are the long-term tenants that are closing down or unexpectedly not renewing their leases. He understands their reluctance to sign up for long-term leases “if you don’t know where your future is,” but from a landlord’s perspective, “the last thing you want” is to have a good tenant terminate its lease.
DeKam insists the sky is not falling for the commercial real estate market, but companies like his will have to be quick and make adjustments to stay on top of all the change that is happening.
“It’d be a mistake to make absolute decisions right now because this is so new and nobody really knows where any of this is going,” he said, noting he’s “not making drastic changes” because of the evolving situation.
“To not be talking about it and trying to figure out where these new parameters are going to fall is a mistake. At this point, we’re just doing a lot of talking and trying to just figure out where this is going,” he said. “You’ve just got to be a little bit nimble and be able to identify what’s happening in your industry and be able to move cautiously down that new path. We don’t know what that path is yet, but we’re exploring it aggressively.”