Covid-19 Leaves Its Mark on Real Estate

Shopping malls are an example of the lasting impact that the global pandemic is likely to have on real estate. If the surge in online shopping represents a new normal, then what is to become of all those malls? In a recent Article, author Parija Kavilanz explores that question. According to data from research firm (REIS) Moody’s Analytics, the rate of mall vacancies is at a historic high of 9.8% in early September, exceeding the previous peak of 9.3% in 2011.

According to the article, Victor Calanog, head of commercial real estate economics with (REIS) Moody’s Analytics, believes that this rate will continue to climb over the next five years. While this is driving the repurposing of vacant space, who is likely to move in? The article explores the emergence of several new tenants, including doctors and dentist offices. Another new segment is education. According to the article, a former 70,000 square foot Sears store at its Grand Teton Mall in Idaho is being repurposed to be a charter school set to open in fall of 2021.

Leveraging this space in the areas of health and education makes sense. Perhaps the third example holds the most potential. Last-mile delivery gets a lot of attention these days, but mostly associated with technology. Empty spaces closer to urban areas could serve as micro warehouses to speed up order deliveries. Per the article, the empty stores in malls can be turned into these micro fulfillment centers.

In his book titled The Zero Marginal Cost Society, Jeremy Rifkin maintains that the means by which goods and services are stored and delivered is grossly inefficient and unproductive. Rifkin suggests that a rethinking of the way we store and ship materials and goods is in order, and he believes we will evolve towards a Logistics Internet. This inefficiency and a description of the Logistics Internet are summarized in this Post from 2014. The movement towards micro-warehouses could be one small step towards this evolution. Rifkin describes the challenge:

In the current distribution system, most private companies own one or a few warehouses or distribution centers, but rarely more than 20. He adds that most independents usually contract with one private enterprise, but rarely handle the logistics of more than ten enterprises. The net affect for private firms is a limited ability to store and move goods across the continent. At the heart of the envisioned Logistics Internet is the enterprise ability to use all of the 535,000 U.S. warehouses and distribution centers. Rifkin notes that if connected in an open supply network managed by sophisticated analytics and algorithms, companies could use the system to store items and route shipments in the most efficient manner possible.

We may not be entering a world where warehouses are viewed as a collaborative commons, but micro-warehouses to have the potential do address some of the inefficiencies. Combined with advancements in technology, the last-mile is likely to see some astounding innovation.

Explore more about COVID-19 via these earlier posts.

FEATUREDA Post Pandemic Society

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