Commercial real estate, like many other industries, has taken a serious hit from Coronavirus shutdowns. Businesses cannot afford their lease payments because they’ve been forced to close. Tenants cannot pay rent because they’ve lost their jobs. And commercial property owners are having to deal with the fallout. While some commercial asset types will struggle to recover from this downturn, there are a couple that will actually thrive in the post-Coronavirus world.
Micro-Apartment Units
A subtype of multifamily real estate , micro-apartment suites, are residential living units that are smaller than your average apartment unit — around 200 to 400 square feet. Efficient design is of utmost importance for micro-apartment units since they are often studios intended to accommodate a single resident.
Apartment complexes housing micro-apartments are often heavily amenity-driven, promoting community among the residents and providing space for activities. Younger residents find significant value in this style of apartment living because they can spend more money on experiences and extracurriculars instead of rent.
Why Micro-Apartments Will Thrive
Micro-apartments have been trending over the last economic cycle. With a smaller footprint comes less rent, which makes these units far more affordable for the average tenant. And that’s good news for landlords, too, because they can actually charge higher per square foot rates on these suites while keeping the overall monthly payment lower. This option is a win-win scenario and will likely continue post pandemic.
Last-Mile Warehousing
Last-mile warehousing is a subtype of industrial real estate. These warehouses are the final stop for packages before they land on a consumer’s doorstep. In order to deliver these items as quickly and efficiently as possible, last-mile warehousing is often located within the city’s urban core or in high-density residential neighborhoods.
Why Last-Mile Warehousing Will Thrive
E-commerce has risen dramatically over the last ten years. In fact, many of the largest retail chains in the world, like Sears, have filed for bankruptcy because they haven’t been able to pivot or keep up with trends. With a rise in online shopping comes a rise in shipping and receiving.
After all, if consumers aren’t picking their purchases up at the store, they have to get them somehow. And that’s where last-mile warehousing comes into play.
Last-mile warehousing is an essential aspect of a retailer’s offering now – if they’re unable to ship to consumers on-demand, there’s a high chance that consumers will purchase that item elsewhere.
Coronavirus has caused a spike in demand for delivery, which is a convenience that only seems to grow. Since last-mile delivery is usually over 50% of the shipping costs, it’s crucial for these logistics companies to be as centrally located as possible to their destinations.
A New Commercial Environment
One thing is certain – the world we lived in at the beginning of 2020 is not the world we live in today. Everything has changed. Whether you’re an active or passive commercial real estate investor, it’s important to keep that in mind.
Real estate investors have certainly seen their fair share of ups and downs throughout the years and our current environment is nothing different. But our economy is bound to bounce back, but it will be different from before. Investors who are willing to get creative and pivot their investment strategy will continue to see success in the future.
Tyler Cauble, Founder & President of The Cauble Group, is a commercial real estate broker and investor based in East Nashville. He’s the best selling author of Open for Business: The Insider’s Guide to Leasing Commercial Real Estate and has focused his career on serving commercial real estate investors as a board member for the Real Estate Investors of Nashville. Learn more at www.TylerCauble.com
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