COVID-19 boosts some real estate trends, puts others on hold

When it comes to trends in real estate investing, the coronavirus has exacted a toll, according to the annual Emerging Trends in Real Estate report.

Densely populated metropolises, once viewed as preferred destinations for millennials, are now being challenged by smaller cities and suburbs. At the same time, co-living and co-working arrangements, for reasons due to human proximity, are being rethought, according to the report, the result of a survey and interviews with industry participants by PricewaterhouseCoopers and the Urban Land Institute.

"My one take away is take nothing for granted ... I've seen many cycles but nothing like this," Mitchell Roschelle, managing partner of new strategy advisory firm Macro Trends Advisors, said Wednesday during a panel discussing the latest Emerging Trend's report.

Behavior can change very quickly, said Chris Lee, partner and head of Americas real estate at KKR & Co., a speaker on the same panel. For real estate, Mr. Lee said, it means that behaviors of businesses and consumers can change "in ways we've never seen before and it is happening very rapidly."

One of the biggest trends that slowed dramatically due to COVID-19 is the appeal of big cities. In the next three to five years people will favor suburbs due to their concern with urban living, the report noted. Charlotte, N.C., Denver, Dallas, Nashville, Tenn., Portland, Ore., and Seattle are identified as "boomtowns" that are attracting younger workers. These cities are already recovering from job losses attributable to the economic fallout of COVID-19.

However, almost all of the 550 industry participants interviewed for the report said they expected the gateway cities of Boston, Los Angeles, New York, San Francisco and Washington to regain their prominence.

Other trends stopped or slowed by the pandemic include experiential retail, leisure travel, business travel, mass transit use, university towns and student housing. Trends that accelerated include work from home, public open space and the affordable housing crisis.

Some 52% of survey respondents strongly agreed and 42.3% agreed that more companies will allow employees to work remotely at least part time. Meanwhile, 17.5% strongly agreed and 45.6% agreed with the statement that employers will require more square feet per worker in offices than before the pandemic.