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The Impact of the Health Crisis on Commercial Real Estate: Frédéric Ducourau's viewpoint
The emergence of new trends, changes in usage, impact on prices... The health crisis has undeniably changed the commercial property landscape in France. It's only a short step away from revolutionizing the sector.
Adjustment of surface areas, implementation of new concepts in anticipation of changes in usage... almost a year after the outbreak of the pandemic, commercial real estate professionals are talking about scenarios for getting out of the crisis, and are already looking ahead to the post-Covid era. Frédéric Ducourau, a notary who has worked with Alexandre Moreau-Lespinard in the Arcachon region for over 20 years, provides an update on the subject.
Corporate real estate facing the challenges of the health crisis
The generalisation of teleworking is not only a satisfying thing. Nearly a year after the first containment, teleworking has resulted in thousands of square metres of completely deserted offices, which does not help the business of corporate real estate professionals. Today, the sector's players know they are at a crossroads. As a result of the global pandemic, 2020 was the worst year for the commercial real estate sector in 20 years, with a 42% drop in investments and a 45% drop in leases! But all is not lost for all that... For Frédéric Ducourau, if the health crisis has made teleworking widespread, it has also initiated a profound reflection among professionals in the sector, more precisely on the transformation of business buildings. Today, the priority is to optimise surface areas: fewer square metres, but better used.
Health crisis = new trends in commercial property
The health crisis has naturally caused uncertainty in commercial real estate. This has led to a change in the way offices are used, which in turn has led to the emergence of new trends. But which ones? For Frédéric Ducourau, the main change concerns search criteria, an observation confirmed by a survey of 500 professionals conducted by the SeLoger group. According to this survey, half of the professionals are now more sensitive to the budget, but also to the surface area of the properties, which is experiencing a downward trend for offices and shops. On the other hand, the trend continues to be upward for business premises. In addition to budget and surface area, Frederic Ducourau notes the new importance of the location of offices.
Shuffling the deck in the sector
With new concepts, the sector's professionals are trying to adopt an anticipatory approach, with the aim of adapting as well as possible to the evolution of usage. In addition to new concepts, the new approach also includes the contractual aspect, which is required to be more flexible than usual to better meet the expectations of professionals. In concrete terms, this means offering more interesting alternatives to the traditional lease: partial occupancy, short leases, subletting, etc. To maximise its potential, Frédéric Ducourau believes that commercial property must become more flexible and mixed. We will thus see the emergence of tertiary buildings specially designed to be multi-purpose, capable of accommodating not only offices and housing but also shops and hotels. If we are witnessing the generalisation of telework following confinement, it is mainly for health reasons. If office life is to return to normal, it will not be without serious consideration of the health concerns of employees. The well-being of users will be at the heart of the "new" corporate real estate (flow management, air quality, environmental certifications, etc.). Moreover, confinement has given rise to a new need: spaces open to the outside world: terraces, gardens, green ramps, etc.
Towards the rationalisation of surfaces
As we said, commercial real estate professionals are leaning towards fewer square metres, but square metres are better used. This translates into areas that, although smaller, are capable of providing more services. This logically requires a rationalisation of office and other commercial space. Rationalisation means offering as many services as possible in as little space as possible. We are already seeing the emergence of corporate building projects with a clear focus on services, including wellness areas, concierge services, fitness and relaxation rooms, catering areas, etc.
Commercial property: falling prices or new business opportunities?
If there is one certainty, it is the doubts that the pandemic has cast over the commercial property sector. Today, professionals in the sector are divided between optimism and a wait-and-see attitude. While some fear the resurgence of offers synonymous with a fall in prices, others foresee new business opportunities, particularly in the area of business premises and warehouses. In any case, this is what the survey conducted by the SeLoger group suggests. For Maïlys Rebora, spokesperson for SeLoger Bureaux & Commerces: "For office property, a decompression of the market accompanied by a fall in prices and an increase in supply is anticipated. For business premises and warehouses, on the other hand, it is estimated that the crisis could create new business opportunities. This naturally leads us to the question of prices: will they be revised downwards? For Frederic Ducourau, it all depends on demand. While demand increased after the first containment, reaching record levels in some regions for commercial property, it has since fallen. In 2020, the yield on offices fell by 6%, stagnating at 4.04%. The same is true for retail property, with a 55% fall in collections, due to repeated closures. So what is the trend in commercial property prices? According to the SeLoger survey, the sale prices of offices and commercial premises have fallen throughout France. On the other hand, rents for offices have increased, while those for commercial premises have stabilised.