Home Strategy Real Estate Commercial Real Estate Outlook: We Must Plan Today To Build Tomorrow’s Downtown

Commercial Real Estate Outlook: We Must Plan Today To Build Tomorrow’s Downtown

Erik Hayden is the Founder and Managing Partner of Urban Catalyst.

The temptation to pause new commercial real estate projects is strong when demand seems weak. Believe me, I get it. I have seven projects in the pre-construction phase in an opportunity zone in downtown San Jose, California. 

But we must keep building today for the downtowns of tomorrow. The Covid-19 crisis will pass and the economy will recover. People will return to offices, eat in restaurants, gather at bars, travel and stay in hotels. After all, most of us are social creatures drawn to vibrant city life.

As people return to work and public places, we need to meet them with innovative designs that make buildings healthier, more sustainable and flexible. Real estate developers aren’t stopping; we are adapting. 

I’ve been speaking with architects, engineers, interior designers and materials suppliers. I’ve also exchanged ideas with industry leaders who’ve joined me on recent panels discussing the future of commercial real estate. There’s a common denominator in these discussions: safety first.

Here’s what it looks like: More square footage and outdoor spaces so workers, residents, diners and shoppers aren’t on top of each other. Touchless environments where hand gestures will operate everything from doors to elevators to bathroom fixtures. HVAC systems with cutting-edge air filtration. High-tech sanitation systems ranging from hydrogen peroxide halos to bipolar ionization. 

Let’s further break this idea down by sector.

Live: The Future Of Multifamily Housing  

Will multifamily make a comeback? Yes. Stories about residents fleeing urban centers like San Francisco and New York during the pandemic dominate the headlines, but let’s look at actual numbers. According to Zillow housing data, suburban areas hadn’t had an increase in demand by mid-summer. In fact, demand barely changed from previous years.

So, that leaves the multifamily market pretty much where it was before — with a housing shortage for workers, seniors and college students. One Freddie Mac study estimates the U.S. needs 2.5 million additional housing units to meet demand. In Silicon Valley, we can’t build housing fast enough to meet the demand. 

The future of multifamily housing will likely look the same as it did before. We must keep in mind that this pandemic is temporary. However, one noticeable change will be that shared building amenities ­will tend toward open-air with rooftop pools and lounges that residents can reserve.

Work: The Future Of Offices

Whether employees will come back to work is one of the most common questions I get these days as our firm develops projects — including office space — in downtown San Jose. Here’s my answer: Office space is not dead. 

While this sector has been one of the hardest hit in the pandemic, we’re learning that despite demand for working from home, social distancing may offset the need for it. As organizations plan to return to physical workplaces post-pandemic, they’ll need more square footage as a social distancing measure.

Many are touring and expanding in the market already. Amazon announced it is expanding offices in New York, Phoenix, San Diego, Denver, Detroit and Dallas. Facebook signed a huge office lease in a former main post office in Manhattan. It also bought REI’s unused office headquarters near Seattle. And several high-profile executives have commented on the challenge a virtual workforce stymieing creative collaboration. Netflix co-CEO Reed Hastings told The Wall Street Journal he wants staff back in the office soon after a Covid-19 vaccine is approved. 

So, what will offices look like? I predict we’ll see fewer building entrances and more queues so employees don’t crowd at doorways, lobbies and elevators. Lobbies will have flexible space for health screenings and tons of floor markers and wall plaques will remind everyone to keep apart. It will be an interesting reversal of the decades-long trend of packing more people into smaller spaces.

As for those modern open-plan offices with cool lounges and long shared tables instead of assigned desks, partitions are coming back, at least for the short-term. The global architecture design firm Gensler recently released return strategies for the post-pandemic office. 

Play: The Future Of Dining, Shopping And Hotel Stays

According to a survey released in October by Morning Consult, 42% of U.S. adults said they are comfortable dining out now, the highest share since June. Another poll by Atom Tickets asked folks if they’d go to movie theaters when they reopen, and only 1% said never. Nearly 60% said they’d return immediately or within a month. Hotels will normalize, too. Occupancy rates have slowly risen to over 48% nationwide.

In tomorrow’s play spaces, architects and designers will add outdoor elements wherever possible. We already see restaurants adding patio seating and cities closing streets for outdoor dining. Here in California, we’re heading for the rooftops. One of my mixed-use projects in downtown San Jose includes a 5,000-square-foot rooftop bar.

Hotel designs will incorporate indoor-outdoor flow for common spaces. We may see gyms move into individual rooms, like what one fast-thinking San Francisco hotel did in the spring. Retail experiences also will head outdoors (so long, enclosed malls — for now) and ground-floor retail will incorporate areas for online order pickups.

The Takeaway

Our downtowns represent the vital heartbeat of urban America. They may be quiet today, but they will roar back to life tomorrow. That’s why we shouldn’t pause. It’s time to create the urban ecosystem people will expect as they return to a new and better normal. Let’s be ready.


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