Business owners large and small are adapting to the changing commerce landscape nationwide by adjusting their workspaces and business models due to COVID-19 concerns.
Local captains of real estate are witnessing these changes in business owners’ needs first-hand and discovering new trends that may be afoot for several different industries in a post-COVID business environment.
Michael Coretz, principal of Commercial Real Estate Group of Tucson, advises business owners to consult a professional and take a second look at their lease before renewing during the pandemic.
“Business owners really need to take a hard look at what their real estate or factory needs are to adapt their business in the COVID-19 environment,” Coretz said. “It may mean downsizing. It may mean more space. Talk with someone who can help you think out your thoughts so you can make changes for the future.”
Coretz said one of the biggest changes he’s seeing is in office space needs as more people are working from home.
“I have a tenant that was in escrow to buy a building, but when the pandemic hit they backed out of it,” Coretz said. “Their lease is up at the end of the month and they’ve downsized their space to about a quarter of what they originally had.”
Coretz said his tenant told him about 60 percent of their staff wanted to continue working from home, while the other 40 percent wanted to come into the office once or twice a week.
“At the moment, they don’t need the excess space so they signed a short-term lease for one year,” Coretz said. “They want to figure out how this is all going to settle out.”
The local manufacturing industry is another area seeing a trend toward downsizing, said Coretz. However, manufacturers seem to have a keen desire to shrink and split up their operations in an attempt to not disrupt production should a coronavirus outbreak happen in their facilities.
“I’ve had several manufacturing companies talk with me about downsizing their current location and opening another one just a few blocks away,” Coretz said. “The two staffs wouldn’t mix in case COVID hits one facility and the other one will still be running. They won’t have to shut down.”
Larsen Baker Tucson Commercial Real Estate President Melissa Lal said 80 percent of her company’s portfolio is comprised of retail spaces, with the other 20 percent being split between office-type space and industrial space. Lal is surprised at how well business has been during the pandemic, she said.
“What’s really interesting is we’ve done way more leasing activity through this COVID time than I thought,” Lal said. “I had thought we would have no leasing activity but we’ve signed and secured 12 new leases for vacant spaces. This is a time for an immense change and it seems people are using this opportunity to make that change.”
Lal said she’s heard all kinds of reasons from her new clients as to why they’re signing new leases during the pandemic—cheaper location somewhere else, downsizing, frustrated with their current landlord or even new business owners ready to living the dream.
“Individuals are taking this time to start a new venture or start a new career,” Lal said. “We’re seeing some of that activity and it has been very promising for us.”
Many of Lal’s restaurateur tenants are seemingly making the move to a fast-casual business model to keep up with the changing times, she said.
“Restaurants are really looking to adapt to fast-casual to set up their business to bring on that revenue stream even more,” Lal said. “Most restaurant owners I’ve talked to think it’s a trend that’s going to stay when they really need to beef up carryout.”
Coretz also said he is seeing a trend in non-local restaurateurs wanting to expand their operations to the Tucson area. He has a client from Phoenix who has been searching for the right property in Tucson for some time. Only recently has he found one suitable and at the right price.
“I have a client in the food-service business located in Phoenix, Sedona and a few other markets. He has been looking at coming down here for a while and now he’s making it happen,” Coretz said. “Everybody is looking at this from different ways.”