There is no question 2020 was a challenging year. The spread of COVID-19 forced many companies to lay off or furlough employees, impacting millions of workers across the U.S. Those who still had jobs shifted to working from home and collaborating remotely as offices around the world closed.
The pandemic certainly has taken its toll on the commercial real estate sector. Leasing and sales activity were down for the year and most CRE firms—from developers to brokerages to lenders—curbed their hiring efforts.
With the start of the new year, and the rollout of multiple COVID-19 vaccines, comes a renewed sense of optimism. The outlook for increased CRE transaction activity in 2021 will translate to new hiring in certain sectors of the industry.
Which Sectors Will Thrive?
The healthcare sector has seen an influx of venture capital funding, which is spurring the need for more life science space. Medical office buildings are growing in demand, driven by an aging population and a shift from hospitals to more efficient ambulatory facilities.
Growth in cloud computing and AI technologies will continue to drive demand for data centers. The COVID bump to e-commerce has accelerated the pace of investments in logistics and cold storage.
Multifamily fundamentals have held up relatively well. Young adults who moved home during the pandemic will look to move back out in 2021 and we will see an increase in rental demand. Investors will continue to pursue multifamily properties, particularly those at market rates.
On the debt side, we will see more transactions in the secondary market with the trading of sub-performing and non-performing loans. Lenders are bringing back teams to focus on new originations opportunities, which dried up during the height of the pandemic.
Developers who can rezone and creatively repurpose vacant retail and hospitality assets will be busy—expect to see redevelopment projects that include industrial, multifamily, healthcare, education, and entertainment uses.
The outlook for continued growth and investment in these sectors will result in additional hiring activity in 2021.
Which Sectors Will Struggle?
Brick-and-mortar, mom-and-pop retail, and restaurants will continue to endure difficult times. Mom-and-pop stores have limited resources to build e-commerce platforms to supplement their in-person stores. According to a study conducted in November 2020 by the National Restaurant Association, 37% of restaurants indicated they likely will not survive the next six months.
Hotel occupancies will continue to be suppressed through the first half of the year. Leisure travel will continue primarily to drive-to markets. Urban hotels will recover only when corporate travel and conference demand resumes.
Any CRE investor whose property portfolio consists of “high-touch” uses will likely focus on asset management and have limited hiring needs through most of 2021.
How Will Hiring Work?
Over the past year, we have seen several changes in hiring and onboarding. As teams have flipped to collaborating through video conferencing, comfort has grown in using video platforms for the hiring process as well. Going forward, first-round interviews will be increasingly replaced by video interviews. Until the spread of the coronavirus is under control, in-person interviews will be conducted in socially distant formats, often outside as weather permits.
As for new hires, virtual onboarding has proved challenging to build rapport with new teammates and learn the inner workings of a company, especially for junior hires that require more training and support. Defined onboarding programs, frequent live check-ins, and additional mentorship will help surpass these challenges. On the flip side, remote onboarding has been a smoother process for senior-level hires who bring a depth of experience.
How Have You Been Impacted?
It is safe to say COVID-19 has left an indelible mark on the CRE sector and how we will conduct business going forward. How has the pandemic changed the way you work? How has it impacted your firm’s hiring plans? I would love to hear your personal insight.
As always, feel free to reach out with any questions. I look forward to working with you in 2021.
Sun-Sun de Swaan
McDermott + Bull
Sun-Sun is based in the McDermott + Bull New York office where she leads the firm’s real estate practice. She brings nearly 20 years of real estate experience and works with clients across the sector, including firms involved with investment, development, financing, and property management. Sun-Sun has experience in a variety of functions across the industry, shaping her expertise and ability to deliver best-in-class talent to clients across the board.