COVID has Accelerated the Rationalization of Space Use

The pandemic has triggered a broad rationalization of how space is used for each property type. This is going to be a slow iterative process, not a quick solution. However, there are trends and ways to create flexibility within spaces to service this process of rationalization.

Since Amazon purchased Whole Foods in 2017, retail has been evolving to complement online purchase activity as well as the demand for experiential spaces leading up to 2020. As a result of the pandemic, retail’s evolution has been put through the equivalent of a meat grinder such as the number of space tenants require, their uses of the space, lease structure, and the necessary alignment with the retailer’s business model. There is still too much mall retail space that is ripe for conversion to housing.

Office space has been accelerated too. The question remains, what is the net demand for office space and how is that space going to be laid out? We believe the ultimate answer is “omniwork” created through a hub and spoke model, where employees have the flexibility to work from anywhere as well as coming into the office. This provides flexibility to employers to accommodate individual employee migration patterns driven by affordability and taxes, COVID prevention preferences and household formation. This will have different implications for different-sized businesses that require different footprints of space.