Sell for More News is a weekly blog series with interesting information from the world of commercial real estate.
Shark Tank investor Robert Herjavec recently said that he believes the coronavirus pandemic has shifted attitudes about city living, altering the dynamics of the real estate market for years ahead.
“This is one of the greatest moves to the suburbs from urban areas since the 1950’s or the 1960’s,” Herjavec said on CNBC’s Squawk Alley.
Herjavec, CEO and founder of cybersecurity firm Herjavec Group, said he feels that the changes in geographic preference will persist beyond just the height of the Covid-19 outbreak, predicting it will be a trend for a while.
“Everybody wants to leave large urban communities and move out into the suburbs,” said Herjavec. “And I think urban real estate is going to hurt for a little bit.”
The residential side
New York City apartment vacancy hit a record high in June. More than 10,000 apartments were listed on the market that month, an 85% increase compared with June of last year. The spike is being attributed to brokers being unable to show apartments due to business restrictions, as well as a general decline in demand.
Realogy Holdings CEO Ryan Schneider told CNBC that the suburbanization trend has been the strongest in the New York City area but it’s not limited to it. The real estate company, which owns such brands as Coldwell Banker and Century 21, also is seeing the trend in California and other areas.
“In every urban geography, what people are searching for has changed versus 6 to 12 months ago…to be much more suburban,” he said. “Even in the urban geographies where that change is not reflected in the actual housing sales data yet, the consumer searching is going in that direction and we continue to see that through the whole Covid crisis.”
The commercial side
On the commercial side, uncertainty persists about the long-term shift to remote work, which many companies adopted in March in a bid to slow the spread of Covid-19, and how it will impact demand for office space.
Hessam Nadji, CEO of Marcus & Millichap, told CNBC that he believes urban areas will lose businesses and residents as a result of the pandemic. But, he said, it won’t be permanent.
“I think the next 18 to 24 months are going to show a lot of exodus out of central business districts, as you can expect,” Nadji said.
“We’re seeing there’s a lot of office vacancy, for example, in the suburbs that have now been absorbed; there’s a lot of demand for rental homes because people are fleeing especially hot spots like New York, but … you just have to keep a long-term view on it.”
The move to suburban areas will be more pronounced in the largest cities…which have other problems like high rent, dreadful traffic, high taxes, homelessness and civil unrest in the form of increasingly violent “peaceful protests”.
Cities like New York, Los Angeles, Chicago and San Francisco have provided residents with a long list of reasons to move. Other cities that don’t have the same problems won’t feel this change as much.
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About Beau Beach, MBA CCIM
Beau is a tenacious Commercial Real Estate Broker, author and adoring father of four. His clients appreciate his no-nonsense demeanor and his legendary work ethic.
Beau leads Beachwood which is a commercial real estate broker for sellers in the Nashville, Milwaukee and South Florida markets.
He’s the author of the books The 3 Reasons: Why Most Commercial Properties Don’t Sell and True Wealth: What Every Seller Should Know About 1031 Exchanges.
Beau can be reached at 800-721-3287, click to schedule a call or Beau@BeachwoodSells.com