At the beginning of the year, nobody predicted the economic slowdown caused by the coronavirus pandemic. On March 1, the economy seemed to be thriving with record-low unemployment and a booming stock market. Two months later, the economy is in a deep freeze, and everyone wonders how quickly, and how thoroughly, it can thaw out.
For many of NAIOP’s Developing Leaders, those 35 years of age and under, this is the first slowdown of their professional lives. Luckily, NAIOP includes many veteran leaders who’ve come through crises before; more than 600 DLs joined a recent NAIOP webinar to hear advice from industry power players.
How to Weather a Downturn
“These disruptions represent an opportunity. Ask what you can do to differentiate yourself,” said NAIOP Chairman Larry Lance, executive vice president asset services for EverWest Real Estate Partners. This is the fifth slowdown that he has been through. “Every time we’ve had a downturn, the first reaction is ‘Woe is me.’ But these experiences are valuable, and we learn and grow from them” Lance said. “At the end of the day it’ll be fine. Just keep working.”
Jean Kane, a former NAIOP chair and CEO of Colliers International | Minneapolis-St. Paul, agreed. “Relationships matter. Stay relevant. Stay engaged. Stay curious. Give yourself permission to take some time, and know things will work out.”
This could even be a good time to try something new. “In these downturns, there is opportunity,” Kim Snyder, president for the West region at Prologis, told the webinar attendees. Trying something new can pay off. “Embrace risk, and challenge yourself to take more risk. Give that some serious consideration in the down cycle.”
A Crisis and an Opportunity
The news isn’t all bad for everyone. “Like everyone else, we’re hunkering down,” Snyder said. However, “The surge in e-commerce is giving our company a little bit of a tailwind. This is a new normal, and we’re hiring: 10 people last month, maybe another five this month.” But on the lending side, the picture isn’t as bright. “Lenders for new loans are looking for quality. But it’s difficult to judge quality. Of the lenders I talk to, their hair is on fire,” Snyder said.
Kane added: “This is a difficult market to come into,” but said that she sees bright spots. “Some areas that have a lot of growth include asset management, property management, running numbers associated with buildings. I love brokerage. The best time to enter the brokerage business is during a recession, because you’ll develop great work habits and work really hard.”
A Slow Return to the Office
Kane said she expects industrial to do well, as well as medical. Office, however, may take a while to rebound, especially since it will take time to convince people it is safe to go back to an office again.
Lance explained that companies already want much more space per employee. “Less density means renters may need more space. But the risk premium for office is likely to go up.” His company is, however, moving forward with some office deals.
Snyder’s company has employees in China. “We aren’t sending people back into office towers in China until we can be certain they are being cleaned well enough.” That hasn’t happened yet. And, it is expensive.
Kane added, “Without a doubt, the running of buildings is going to be different.” She advised hiring an HVAC expert who can bring the building up to EPA standards and keep it there.
Rethinking Office Space and Amenities
The building environment will be different as well. “There will be hand sanitizer, limits on how many people may be on an elevator at a time,” Lance said.
“The big push over the last two decades of densifying office space is going to go the other way,” Snyder said. “When you go into an office, you want it to be clean. People are not going to tolerate sloppy behavior.”
That led a DL to ask what might happen with common spaces in office buildings. “This experience is going to change the way we think about work, and amenities will change as well,” Kane said.
But Lance said he expects the concept will survive, although it will look a bit different. “We’ve moved so quickly to build these common spaces,” he said. “But I think we’ll need to mandate less density. The common spaces will still exist, but densities and behaviors are going to have to change. It will be an interesting evolution.”
More Made in USA?
There is plenty of flux in the industrial sector as well. “Ports are disrupted. There’s no place for goods to go,” Snyder said, and this problem is going to get worse before it improves. “It might make for good back-to-school sales, but there will be frictional pain between now and then.”
However, he said he doubts manufacturing will be moving back. “As for onshoring, it still costs a lot to deploy labor in the United States,” Snyder said. “However, some manufacturing may more to Mexico and Canada, to be closer to the U.S. but less expensive.”
How to Land That Next Job
This will be a difficult time for commercial real estate and the larger economy. “A lot of great people are being laid off, and employers understand that the layoff isn’t a reflection on your ability,” Kane said. “Work your network. Be willing to pivot to other areas.”
Snyder added that: “NAIOP’s educational programs are opportunities to explore other areas, and see whether there is something you can do with the skills you’ve already accumulated.”
Finally, be flexible. “NAIOP provides terrific connections. Use that network,” Lance said. “Collaborate. Ask questions. Your relationships really count. Be open to anything. This is not the time to be picky.”
Rich Tucker is Director of Public Policy Communications at NAIOP, where he develops and executes communication strategies to raise the visibility of NAIOP’s advocacy work on behalf of the industry