2020 was a year of massive change and learning for the real estate industry. From office space to apartment buildings, owners and operators were forced to adopt new ways of thinking about both their spaces and their tenants. As we begin 2021, it’s clear that how we lived, worked, and thought about space in 2020 will not always be the norm. What trends are here to stay, and what will be left behind?
Keep reading to hear insights from Episode 20 of Common Knowledge: Real Estate Tech + Innovation in 2021, moderated by Cory Weinberg (Journalist, The Information) with panelists Brad Hargreaves (CEO and Founder of Common), Gelena Skya-Wasserman (Founder + CEO, Skya Ventures), Jamie Hodari (CEO, Industrious), and Adam Demuyakor (Co-Founder + Managing Partner, Wilshire Lane).
Social distancing based residential design
In March 2020, space suddenly became one of the most valuable amenities in real estate. With social distancing guidelines in place, restaurants, parks, schools, and residential buildings looked for ways to make their spaces both functional and safer. While some solutions were headline-worthy (Domino Park’s socially-distant spray painted circles come to mind) and some were purely utilitarian, Brad Hargreaves advises residential operators to focus on the immediate needs of their residents, and not waste time on creating COVID-safe spaces for a post-COVID world. This can look like transforming leasing offices into work-from-home spaces, as Common is doing at The Edge by Common, rather than designing ground-up developments with socially-distant amenities.
Verdict: Leave it in 2020
Alternative security deposit options and payment plans
With record levels of unemployment throughout 2020, many property managers faced high delinquency rates and low occupancies. It became clear that traditional rent collection methods were not going to be sufficient to keep residents housed and buildings stable. Companies like Common and Skya Ventures both met this challenge by providing renters with payment plans and third party tools like Obligo, which allows new tenants to save money by paying a small monthly fee rather than a full month’s rent for security deposits. With the financial crisis and its effects expected to linger for years, these methods and other tech based alternatives promise to grow in 2021 and beyond. Gelena Wasserman, founder and CEO of Skya Ventures, continues to look for ways to keep rent low for residents, including alternative forms of payment like personal data. No matter what the solution is, operators and developers will need to continue finding unique ways to make their buildings affordable for renters, without sacrificing returns.
Verdict: Here to stay
In the past 10 months, several large tech companies have gone permanently remote. In May, Twitter announced that workers could WFH permanently, and in August, Pinterest paid $89.5 million to get out of a lease for a 490,000 sq. foot office space in San Francisco. However, Jamie Hodari, CEO of Industrious, doesn’t believe that working together in person is a relic of pre-COVID life, but that where we work and how we work in those spaces need to be reimagined. According to Jamie, many of coworking’s fundamentals, like varied layout types and the ability to book on-demand spaces through a subscription service, will be widely adopted by companies that once stuck to a Monday through Friday, 9-5 schedule in an open office plan. These changes will be informed by both a desire to return to the office (80% of people want to) and an increased need for flexibility now that a traditional 10 year office lease no longer seems wise or necessary.
Verdict: Here to stay for some, but not for all
The end of brick-and-mortar
The pandemic brought about a surge of online ordering and new business models that while they had existed pre-COVID, saw skyrocketing success during quarantine. Adam Demuyakor, Co-Founder + Managing Partner at Wilshire Lane, gives ghost kitchens as an example of a business that both met the needs of consumers suddenly ordering more takeout, and the needs of real estate owners looking to adapt existing spaces that weren’t generating returns during COVID. Although people will return to dining out and purchasing in-person once social distancing restrictions have been lifted, the behavioral changes we witnessed among consumers during COVID are indicative of longer-term trends. As an investor, Adam is looking at 2021 as a major reset, seeking out business models that may have never existed without the pandemic, but are becoming increasingly relevant.