From its inception in 2020, the pandemic has affected all walks of life, including consumer behavior and the real estate industry. Here we will outline some of these effects and how they may impact investment outlooks.
COVID and Consumer Behavior
Initially, the pandemic prompted a new pattern of in-store shopping.
As explained by Placer.ai in the whitepaper Unfolding Consumer Behavior Patterns in the New Normal, there was an increase in “mission-driven shopping” during the early days of the pandemic, in which shoppers would aim to buy as much as possible in the fewest number of trips to stores.
This pattern of shopping was understandably based on fear, uncertainty, and the desire to get as much done as possible with the lowest risk of infection.
Recently, however, mission-driven shopping looks to be on the decline, with shoppers making shorter and more frequent trips to stores. According to new research reported by Business Wire, 85% of consumers will do more in-store shopping in 2022 than the previous year.
With perceived high rates of immunity from recovery and vaccination, many areas are relaxing previous COVID restrictions. As COVID restrictions continue to be lifted and as businesses re open, many are eagerly returning to stores and restaurants.
While some have predicted that the pandemic would make people permanent online shoppers, this does not appear to be the case. Rather, consumers are returning to on-site shopping with high frequency, eager to get out and socialize after being cooped up at home for so long. As the old saying goes, “absence makes the heart grow fonder.”
COVID and Real Estate
As Aviva Sonenreich from a recent Forbes article put it, “the biggest prediction for 2022 is the recovery of the commercial real estate industry.”
According to a report on real estate trends in 2022 from PricewaterhouseCoopers, while stores, restaurants, and offices “emptied out with astonishing swiftness” at the pandemic’s inception, the real estate sector is currently bouncing back.
For example, vacation travel is making a big recovery, and hotels near population centers are “set to reap some of the greatest benefits.” The report also states that the pandemic has magnified a shift away from “expensive downtown markets” and toward “smaller, more affordable ones.” As a result, “businesses need to stay nimble” and turn uncertainty into opportunity.
Through it all, the desire for socialization is key. According to an article from Coldwell Banker Real Estate LLC, those looking to invest in real estate should consider investing in “retail experiences that extend beyond shopping.” Examples include:
- shopping centers offering a variety of restaurants and stores
- entertainment (e.g. movie theaters)
- live music
- work out options
- spa/wellness options
All in all, new leasing opportunities can be plentiful, even when taking the pandemic into consideration.