Real Estate Was A Catastrophe In 2020. 6 Experts Predict What Comes Next


Almost one year ago to the day—March 11th to be exact—Rudy Gobert of the Utah Jazz tested positive for COVID-19 before tip-off in an otherwise meaningless game against the Oklahoma Thunder. Within 48 hours the NBA had shut down, along with the Masters, the Olympics, the NHL, the French Open, and eventually, almost every city in America over the next two weeks.

Twelve months later if one thing is certain as the world moves into 2021 it’s that there will be no full stop reverse to “normal”.

Despite the rollout of multiple COVID-19 vaccines and a finally inaugurated new President Biden administration, many things in life still don’t resemble what they looked like twelve months ago—particularly across the real estate industry.

Since the pandemic exploded last March, business closures have soared to their highest level in a generation as in-person everything shut down (and Amazon stock soared), particularly restaurants, bars, hotels, and nightlife venues. For buzzy urban hubs like New York City, Washington, D.C., Seattle, and Los Angeles, the fallout from a real estate standpoint has been gutting.

Commercial office space arguably is faring even worse. Vacancies in America’s marquee business epicenters like Manhattan and San Francisco are still rising as millions of workers discover the joy of clocking in remotely and companies continue to relocate to more tax and regulatory-friendly states like Texas, Nevada, North Carolina, and Florida seeking a lower cost of doing business and a healthier, safer quality of life for employees during an ongoing pandemic.

Then there’s the live entertainment business—including concerts, festivals, theater, the orchestra, jazz and comedy clubs, and so on—which, unlike sports, still is largely shut down altogether and likely will remain so through 2021 (Taylor Swift just cancelled her tour).

The bottom line is that it’s still brutal out there—whatever you read, wherever you live, or whatever your view is on COVID-19’s origins or its politics. And the ongoing uncertainty about what the real estate landscape will look like on the other side of the pandemic—and more importantly, how consumers will re-prioritize how they embrace physical space after the masks come off—is still leaving most real estate developers, investors, and businesses on the sidelines and on edge.

So why isn’t anyone talking about what this all means long-term?  

The answer is that at this point in the pandemic, even at the highest levels of global real estate, no one really knows for sure what comes next. Some people I contacted for this story weren’t even interested in commenting—mostly because they didn’t want to be wrong. Others were still just trying to stem their own bloodshed and didn’t want to go on record about how bad the present reality still really is. A few who seemed to know something that I wasn’t privy to simply didn’t seem interested in tipping their hands.

Everyone, however, agrees on a few simple truths: COVID-19 accelerated underlying trends that were already shifting America’s relationship with the built environment and forcing questions about how people want to live and work in a society that’s now fully, technologically capable of supporting an untethered life without sacrificing productivity or community.

The other certainty is that like all crises there will be winners and losers on the backside of COVID in all industries, but particularly across real estate.

So I decided to ask six of the country’s leading experts in development, technology, brokerage, venture capital, and the economy for their predictions for real estate in 2021 under the new Biden Administration, how the industry will continue to be shaped by the pandemic over the coming years, and who those winners and losers might be.

The Big Winner: Single-Family Housing

Triggered by a national panic for social distance, home offices, and more closets to hoard the Lysol and toilet paper, no sector of the real estate industry has benefitted more from the pandemic than single-family housing,

“Among the major real estate types, single family housing will continue be the clear winner in real estate in 2021 as it was in 2020,” says Susan Wachter, Albert Sussman Professor of Real Estate at Wharton at the University of Pennsylvania and one of America’s leading real estate economists. “The shift to home for working, playing, exercising and more will be self-reinforcing, as renovation and rebuilding lead to a re-envisioning of homes as a bigger, more permanent center of our lives than they already were.”

According to indices like Realtor.com, Zillow.com, and Redfin.com, only a half dozen U.S. housing markets have growing supply and decreasing prices. Hundreds of others are up 30% – 50% year over year shattering price records across the country.

Driving this less than the COVID-19 pandemic is a more complicated convergence of factors fueled most of all by a housing supply crisis. For the first time since WWII when millions of U.S. servicemen and women returned home from overseas, America has a shortage of single-family homes relative to demand on a national scale in all 50 states across virtually all price ranges. The shortage is particularly acute when it comes to affordable housing due to the fact that McMansions have dominated new home construction since the early 2000s. As a result, the volume of added supply hasn’t tracked population and income growth or household formation numbers (i.e., smaller families, Millennials with no kids, Baby Boomers downsizing). 

“The challenge of undersupply will continue to define U.S. housing markets in 2021 and beyond,” says Senior Economist for Realtor.com, George Ratiu. “We started 2020 with a shortage of about 3.8 million homes. The pandemic-induced quarantine placed a further strain on new construction, while builders’ new volume has lagged behind buyers’ appetites. In addition, last year’s hurricanes, floods, and forest fires put inventory even further behind the proverbial eight ball. On top of rebuilding tens of thousands of destroyed properties—markets will remain inventory-constrained for the foreseeable future.”

Translation: thanks to the pandemic, a rough year with Mother Nature, the realities of demography, and the physics of housing construction which can’t grow homes overnight, single-family real estate prices across the country have nowhere to go but up. And that reality isn’t budging any time soon.  

For the 65.8% (or roughly 217 million) of Americans who had already taken advantage of record low mortgage rates since the end of the Great Recession to buy or refinance, this is some of the best news of the year. Most Americans’ homes are their largest assets, and for the time being, those nest eggs are relatively insulated from future unexpected jolts to the economy or destabilizing events abroad—or another pandemic.

“A decline in residential real estate prices in most areas of the country would be a shock right now, especially given the fact that we are enjoying the lowest mortgage interest rates in U.S. history,” says Craig Studnicky, President and CEO of RelatedISG, a top luxury brokerage in South Florida that produces extensive data and market reports on single-family housing. “Current borrowing costs, combined with modest inflation, plus the pandemic has created one of the most fertile real estate buying environments in decades and I’d be eating my words if we didn’t see prices hold strong in well past 2021.”

For the millions of first-time Millennial homebuyers who didn’t catch the current real estate wave before it started peaking, the good news according to Wachter is that 2020’s irrational exuberance can’t last forever.

“Eventually,” says Wachter, “The extraordinary price increases of 2020 will put a damper on housing sales and appreciation at some point in 2021 or 2022. 2020 was a blowout year in which housing was the only V-shaped recovery sector. But that can’t last. Sooner or later every boom hits a wall.”

Back To The ‘Burbs

More broadly across the single-family housing market, the other COVID shock that no one saw coming was the screeching halt of decades of re-urbanization, as millions of Americans fled their condos, townhouses, and apartments in dense downtown neighborhoods in favor of more leafy, distant neighborhoods with less human contact.

The result in fewer than 12 months has been a 45-degree price spike in the 30-100 mile rings around almost every major U.S. metropolis while downtown property values and rents in many cases have depreciated proportionally.

“Outside of work, the pandemic has caused the greatest relocation of any time in American history and this has its own real estate implications which we will not know for some time as it nets out,” says Ryan Freedman, a commercial property developer and co-founder of venture capital firm Alpaca which invests heavily in real estate ‘prop tech’ (property technology). “But early data show that a shift to the suburbs from density while cities struggle to maintain their tax base and a certain quality of life likely will be self-reinforcing. Ultimately, when the benefits of urban living go down far enough as restaurants and bars close and crime goes up, the sacrifices that people make to live in smaller, more expensive places all of sudden aren’t worth it anymore. That quality-of-life issue in my opinion will continue to drive the ‘Great Relocation’ that’s underway.”

Affordability is the other factor that’s luring people back to the suburbs, adds Realtor.com’s Ratiu, as the desire to get more for less during the pandemic crashed head on into peak real estate in markets like New York City, San Francisco, Chicago, and Los Angeles where prices long ago hit “the point of stupid”, as one broker told me.

“Aside from the physical desire for social distance and more interior space during the pandemic, the other important factor fueling re-suburbanization is the move to affordability,” Ratiu says. “The last decade saw the re-Renaissance of urban downtowns, as many young people flocked to cities to start their careers, while enjoying the benefits of city life. However, real estate prices in cities outpaced wage growth for most Millennials. As this younger demographic entered its 30s more recently and started having families, the need for larger homes and a focus on schools shifted their attention away from downtown. This year’s pandemic accelerated that underlying trend, as many of these people re-evaluated the premium that they were willing to pay to live downtown. And because more and more younger Millennials will reach home buying age over the next 4-5 years I’d be surprised if the rebound in suburban real estate didn’t continue well past 2021.”

More potentially transformative than the fact that’s it happening at all, however, is what America’s new re-suburbanization will look like as it begins to take shape. This time around compared with the 1950s and 1980s, the buying class has an entirely new set of priorities compared with the Brady Bunch and builders and developers who have been paying attention are already well positioned to reap the rewards.

“Today’s suburbs will look much different than they did 20 and 50 years ago and on a much larger scale,” predicts Ratiu. “Inspired by the era of urban renewal, the last decade has seen the emergence of the ‘suburban downtown’: higher-density, mixed-use real estate developments, which have paired residential housing with offices, grocery store-anchored shopping centers and experiential retail, such as restaurants, bars, small event venues, and playgrounds. For a generation who enjoyed city living and wants similar amenities, but in a family-friendly format and at a more affordable price point with more space to isolate if it’s ever necessary again, the demand for this new hybrid suburban life inevitably will increase.”

Those already entrenched in suburbia who never left are likely feeling a little bit of “I told you so” right now. Yet, the bigger issue than what America’s next generation suburbs will look like is what happens to all of the condos, apartments, and townhouses left behind downtown. What’s next for them?

On this front, all of the experts I spoke with agreed that answer’s simple: not much.

“Cities like New York, San Francisco, and Chicago will always be desirable,” says Alpaca’s Freedman, “Some restaurants might close, but others will survive and open. New concepts will emerge. Some people will want to return to the office and landlords will find innovative uses for space that’s left over. Once there’s a vaccine retail will come back in whatever form comes next. Manhattan survived 911 and returned stronger than ever. It can handle COVID.” 

America’s Great Migration

On a national scale, however, COVID’s real estate shockwaves may prove structurally deeper and longer than the inch-deep wave of re-suburbanization they unleashed—which in turn could transform where and how developers build for decades to come.

Thanks to the pandemic, Americans are on the move faster and farther than at any time since WWII, which raises complicated questions about the future no one really has the answers to yet. For instance, what if the people who moved to Salt Lake City, Austin, and Boise from Palo Alto during the lock downs stay for good? What if companies end up letting workers choose to work remotely forever? If the human tsunami from New England to Florida doesn’t decelerate, what then?

How these questions answer themselves will fundamentally re-order America’s new real estate “normal” and quickly cull which cities and regions prosper economically and creatively in the coming years and which ones lose out.

No matter who I spoke with about the “Great Migration” under way, the same words kept surfacing: warmer, safer, smaller, stabler, lower taxes, less regulation, and fewer lockdowns.

These aren’t new things that Americans want, particularly as they get older. What’s changed now twelve months into the pandemic is that the same desire for warmer, safer, and stabler is now accelerating a younger generation that can work remotely to move from high tax, high regulation, higher cost of living states to places where developers and demographers never thought they’d consider living before. As a result, housing sub-markets that have been slow to flat for years have seen a doubling in activity simply because of the assets they’ve had all along—like space, affordability, good schools, a healthy, active quality of life, and screaming hot wireless broadband to Zoom and stream Netflix at the same time.

“The pandemic caused dynamic changes across U.S. real estate. The result residentially is a market from coast to coast that has limited inventory, rising prices and shifts in buyer priorities when it comes to location most of all,” says Mauricio Umansky, co-founder of The Agency in Beverly Hills, a leading global luxury real estate brokerage and lifestyle company.

“Due to COVID-19, people are realizing that there’s no longer a need to live within commuting distance of the office or close to the gym, the supermarket, or your kids’ school in many cases. There are millions of people who can easily continue to work from wherever they want in the world. This means well-priced homes in places that were once only seasonal destinations are getting multiple offers from people who are looking to move there permanently or semi-permanently this time. High-priced vacation rentals are still flying off the market in traditionally second-home markets such as Aspen, Park City, Malibu, Montecito, and Cabo San Lucas and I don’t expect this to stop.”

COVID’s “Zoom Town” boom has also trickled down to dozens of small to mid-sized cities that have long been (incorrectly) considered too remote, too southern, too hot, too flat, or lacking in amenities, culture, or sophistication by the 1% crowd to sustain the kind of Whole Foods, white-collar, innovation economy that would make raising a family or relocating a company there a persuasive move.

Since the pandemic hit last spring, however, dozens of these previously “second tier” American cities—like Boise, Birmingham, Jacksonville, Columbus, Salt Lake City, and Orlando—now have tighter housing markets than Boston or LA as Americans seek less dense, more affordable places to live that offer closer access to the outdoors, better hospitals, smaller schools, warmer weather, and more open space with no clear end to the pandemic in sight. 

Not inconsequentially for some of these states, particularly Florida, Ohio, and Texas, America’s great pandemic migration also has the potential to alter the face of the country’s politics for generations—something that is fast getting the attention of local and state politicians in both parties.

In South Florida, for instance, some locals worry how much of their politics new residents from New York City and California will import with them. Bodies mean votes, one broker confided to me. But very rich, politically active bodies mean PACs and donations and fundraisers, which has the potential to swing the state harder and faster left of center. Similarly, nothing is shading Texas faster from purple to blue right now than COVID-19 as more and more people flee to cities like Austin and Dallas from the overpriced Bay Area and perpetually locked down LA.

When the COVID fog clears, there will be thornier issues to untangle if the millions of people who decided to move during the pandemic stay where they landed—like infrastructure, roads and transportation, Congressional redistricting, and parking (gasp!). The cities left behind also will have to contend with a shrinking tax base, fewer customers patronizing local businesses, and re-priced property values. Whether that will happen in the first place, however, says RelatedISG’s Studnicky, may boil down to factors less complicated than most people expect.

“As COVID becomes more manageable,” predicts Studnicky, “My guess is that a lot of people will start to experience buyer’s remorse when things open back up again in major cities. There are probably a lot of people who moved to the Hudson Valley or Vermont from New York City during the pandemic who are already wondering why they have to drive twenty minutes for a latte and where the pizza is.”

Hardest Hit: Retail and Hospitality

Few real estate sectors were blindsided more savagely by COVID in 2020 than retail and hospitality. At the height of the first surge, over 90% of non-essential stores, restaurants, bars, and nightlife venues across the country were forced to close. Entertainment, sports, tourism, and business travel ceased to exist altogether virtually overnight, replaced by a take-out and delivery only economy. Hotel vacancies, as a result, soared to 80% across the country from the Four Seasons to the Fairfield Inn, filled mostly by students, healthcare staff, essential workers, and others displaced by the pandemic. For a few months between March and May, Americans got a taste for the first time of what life would look if retail and hospitality never existed—and it was terrifying.  

“Businesses that depend on consumers’ physical presence took the biggest hit in 2020,” says Realtor.com’s Ratiu. “That means airlines, hotels, cruise ships, conference and concert venues, theaters, resorts, hotels, along with restaurants, bars and retail centers all found themselves struggling for survival along with their landlords as well.”

Twelve months later not that much has changed. Despite fewer business restrictions, a downward trajectory in infections, and massive pent-up demand, a majority of Americans are still fearful of traveling, flying, staying in a hotel, going dancing, or eating out. Physically, to one extent or another, we all remain anxious about being around anyone who’s not in our “pod”. As a result, few experts believe that the year ahead for retail and hospitality will be anything but Darwinian.

“This isn’t ‘rightsizing’ in my opinion,” says Ratiu. “Thanks to the pandemic, retail and hospitality are now undergoing large-scale, widespread ‘downsizing’. Malls and shopping centers anchored by independent stores will experience continued retrenchment into 2021 and 2022. With many consumers still struggling financially, discount and value-focused stores like Target and Walmart will continue to grow. And the market share expansion of e-commerce will stay well into 2021 and beyond, as the convenience factor of buying online and things just showing up at the front door is now habit that will outlast the pandemic. How permanent this all becomes ultimately will have an outsized impact on smaller, independent retailers, restaurants, and hotels that don’t have a national footprint to absorb the long-term losses.”

For cities, COVID’s retail gutting has the potential to have farther reaching consequences. Not since big box stores has America’s small business fabric been stretched so thin. From an economic standpoint, what no one knows is the extent to which this next phase of the “death of retail” will trigger a more widespread re-pricing of mixed-use real estate on a national scale, which inevitably will trickle uphill to the banks, Congress, and the Federal Reserve.

“Real estate lives and dies based on what consumers want,” Ryan Shear tells me. Shear is co-founder of Property Markets Group (PMG), a national developer that builds high-end, high rise, mixed-use, retail, and residential projects in A-list markets like New York and Miami.

“A lot of the trends that developed during the pandemic are likely to be long term. For instance, after the lock downs last-mile delivery will continue to cannibalize traditional retail distribution which effects the performance of retail based real estate. If people—either residents, office users, tourists, or business travelers don’t come back—retail simply can’t survive in its current form, and this will have a huge impact on wider real estate valuations, particularly for mixed-use buildings that rely heavily on ground level anchor tenants as a luxury building amenity. That’s a lot of real estate out there.”

The more likely reality, most experts agree, is that the fundamental relationship between consumer, retailer, landlord, and developer will have to be retooled down to its essential parts and built back differently.  

“The pandemic has shed light on the imperative for retail real estate owners to recreate their properties for a new generation of shoppers,” says Brendan Wallace, co-founder and CEO of Fifth Wall, the country’s largest real estate and prop tech venture capital firm. 

“As a result, landlords have realized that legacy brands are no longer reliable enough to occupy large portions of their portfolios. Meanwhile, up-and-coming digitally native brands that are now opening stores as the big chains close are growing at an incredible clip. But the traditional leasing model doesn’t work for them. Retail landlords who actually start investing in these new brands, however, can unlock a radically more aligned and stronger relationship with the retailers of the future. And by this, I mean actually providing capital to the brands themselves. Think of it like a Netflix model, and there’s a similar opportunity on the horizon for retail landlords to combine distribution (their properties and visitors) with direct investment in content (brands that can serve as exciting new tenants). I expect that this evolution of a retail owner from being landlord to partner will be the next game changer for retail real estate.”

Compared to retail, hospitality’s pandemic fallout arguably will be simpler and faster to crawl out of. Since hotels and restaurants never faced an existential threat from online retailing pre-pandemic in the first place, nothing needs to be radically reinvented for the industry to rebound. Customers just need to come back.

“As cities have opened back up and mask wearing and social distancing has become more widely accepted, we’re already seeing early signs of improvement,” says RelatedISG’s Studnicky. “Increasing domestic air travel is having huge impact on struggling hotel, restaurant, and tourism markets and we’re beginning to see an uptick in weekend trips in local markets as well. Business travel is still relatively rare. But I’m confident that also will return in 2021 as we begin to see the positive effects of the vaccine rollout and consumer confidence comes back.” 

Also on hospitality’s side is the realization by hundreds of millions of Americans during the pandemic that beer gardens, comedy clubs, James Beard restaurants, and 5-star hotels are all essential businesses.

“People can only live for so long without the things that make life worth living,” says Ratiu. “So I think it’s only a matter of time before a return toward a new normal restores business activity for most restaurants, bars, hotels, and other hospitality venues. Given the logistics of the vaccines’ roll out, many of these businesses likely will still struggle during the first half of 2021. But over a longer period, it’s inevitable that people will return to a historical level of social interaction, which will boost the travel, entertainment and retail industries back to normal.”

The Big Loser: Commercial Office

The odds of a swift post-COVID return to normal for the commercial office sector appear less sanguine.

While bars and restaurants might be essential, showering every day and working from the office five days a week, not so much. As a result, commercial office buildings in many of America’s business epicenters now resemble at high-speed the wrecks that America’s malls have become in slow motion.

“Work-from-home was a tipping point moment for commercial office real estate during the pandemic,” says Wharton’s Wachter. “And now there is no going back. Going forward there will be hubs of Silicon Valley and Wall Street workers geographically dispersed throughout the country, and mega cities will see rent and price declines as more affordable locations without onerous commutes and a lower cost of doing business become more attractive.”

The good news for millions of white-collar employees is that they can now work-from-home wherever they can still afford to buy a house. The bad news for commercial office space landlords is that thousands of companies aren’t re-upping their leases this year, leaving tens of millions of square feet of Class-A office space empty.  

“This is why the longest-term effects of the pandemic will be felt in big city office buildings,” predicts Alpaca’s Freedman. “Nobody knows yet how offices will repopulate once they can or what the mandate for business travel will be after we have all lived in a Zoom world for so long. But virtual work will be available to anyone who wants it. As a result, technologies that support hybrid work concepts will gain popularity, smaller, local satellite offices and co-working pass spaces will prosper, and the asset-light, ‘pop-up’ workspace paradigm will continue to evolve. All of this will inevitably take companies and bodies away from the traditional commercial office environment.”

From a developer’s perspective, PMG’s Shear agrees that the essential relationship between business and space post-pandemic needs re-configuring.

“The dispersed workforce is here to stay,” says Shear. “And that will drive the accelerated demise of open office layouts. Meeting rooms and small private offices will be prioritized in office design that’s geared towards opportunistic utilization rather than daily drudgery. In a lot of ways, it’s a win-win. Millions of workers aren’t in a rush to get back to long daily commutes and employers in the long run will benefit from rent savings, lower overhead, and a more customized, made-to-order work environment knowing that de-centralized teams have proven successful.”

Not everyone’s as bearish on the return-of-the-office sequel, however. RelatedISG’s Studnicky, who admittedly is biased due to the smoking hot vortex that is currently South Florida’s real estate market, doesn’t have a dog directly in the commercial real estate fight. But he doesn’t think as a matter of sanity everyone wants to work from home forever.

“Human contact is essential to who we are. It’s essential to business and ideas,” Studnicky says. “In South Florida at least, we’re now seeing the office market begin to strengthen and I think we’ll continue to see this momentum continue through 2021 as the vaccines become more accessible and businesses give employees the opportunity to return safely. People are back to work in Miami because they can.”

The Other Big Winner: Prop Tech

Whatever time frame it takes for Americans to find their “new” normal again, COVID’s other big real estate winner—prop tech—will be one of the primary drivers making that future possible.

“COVID-19 has rapidly accelerated the innovation and adoption of intelligent building and smart home technologies that were already taking hold in the real estate industry,” says Fifth Wall’s Wallace. “But now thanks to the pandemic most real estate owners feel as if they’ve been thrust five years into the future. As a result, they now recognize that technology adoption isn’t just a ‘nice-to-have’. It’s a necessity. And in the longer-term if real estate owners don’t figure out a strategy to invest in and get access to the technologies that can be strategic to their businesses in a post-COVID world they will soon be, with certainty, on the wrong side of history.” 

Some of these innovations are obvious problem solvers that will become operational standards, like remote entry, voice activated elevators, and digital payments for rent, room service, and valet parking.

“Contactless everything is COVID’s big winner and that will become the new norm,” predicts Alpaca’s Freedman. “All new office buildings will be designed with contactless technology and all old buildings will be retrofitted with it at some point. Keyless entry, self-guided 3D tours, and property management software stacks will continue to thrive in the multi-family apartment sector and in new smart homes. Ultimately, all the new tech-enabled solutions that were being ‘pushed’ pre-COVID will now be ‘pulled’ as landlords demand solutions to meet a post-pandemic world.”

For the start-ups and entrepreneurs pioneering these technologies, the pandemic couldn’t has been a boon for business—accelerating proof of concept, demonstrating market reach, and leading many of these companies to raise subsequent rounds of funding in the smoking hot middle of the pandemic despite ongoing volatility in the markets.

“Prop tech has seen enormous tailwinds over the last five years and COVID kicked it into high gear,” says Fifth Wall’s Wallace. “Real estate is the single largest industry in the U.S. Yet it remains one of the most under-technologized sectors of the economy. In the office and residential sectors, for instance, there’s now an urgency to adopt things like digital workflows, security and access control, and air quality technologies as landlords try to lure tenants and consumers back to their buildings. But a lot of these concepts aren’t ready for prime time yet. A lot of this has to do with a disconnect between large real estate companies, venture capital, and the start-ups pioneering the next cutting-edge technologies—which is why we created Fifth Wall. By leveraging the capital and resources of REITs and national real estate companies we’re creating greater scale and a faster path to execution for entrepreneurs, while providing a more efficient way for these real estate companies to access the technologies that will shape the future of their industry. Over the next few years, the speed at which all of this innovation is happening will only increase.”  

Thanks to COVID, technology also will continue to upend how homes are bought and sold, predicts Realtor.com’s Ratiu.

“During the pandemic consumers have embraced the conveniences that now make home buying more digital and hands-off like 3D virtual tours and remote notarizations,” says Ratiu. “From viewing homes, to learning about neighborhoods, to going through with inspections and closings, the real estate buying process inevitably will become more virtual post-pandemic. While homes are distinctly different than any other kind of product, start-ups and technologies that can streamline the buying and selling experience, take out the pain points, and offer something akin to a one-stop shopping environment like Amazon are likely to stand out.”

The Big Unknown: President Biden

Looming large at the end of the tunnel when it comes to the hope for an industry-wide post-pandemic rebound—or at minimum a détente with the current bloodshed—is what the new Biden Administration will do as it gets its legs and begins to define the shape of the recovery and reveal the underlying levers of its economic plan.

Some priorities require immediate attention, like dealing with soon-to-expire eviction moratoriums for renters, stubborn unemployment, and easing state and local restrictions on small retailers and hospitality businesses that haven’t closed yet but are still paying rent. Other policy and legislative issues that could have more structural impacts on real estate’s new normal have longer runways and bigger consequences, like repealing Trump’s tax breaks, tying building codes to “Green New Deal” climate policies, or eliminating property depreciation.

“Biden and the new Congress face a significant list of real estate challenges over the next four years,” says Realtor’s Ratiu. “Chief among them is the ongoing supply and affordability crisis. The significant fiscal and monetary steps taken at the height of the pandemic went a long way toward stabilizing real estate markets and financial markets overall. Informed by the last recession, forbearance and tenant eviction protections were successful at helping people stay in their homes. However, with the recovery in employment slowing as we approach move into 2021 and the number of people drawing unemployment still above 20 million, additional government financial support is needed to keep a lot of real estate sectors afloat that are still treading water.”

Far from subtle signals from the Biden Administration on its tax policy also will have immediate consequences for real estate as it finds its new equilibrium.  

“President Biden campaigned on an increase in federal taxes,” says Realtor.com’s Ratiu. “If that happens, it will likely cause a continued migration from Northeast states, particularly states New York, New Jersey and Connecticut, to states like Florida and Texas. Since Trump’s passage of the Tax Reform Act of 2017, these states already have seen a steady increase in population, and tax increases put in place by the Biden administration will continue to push buyers, investors and real estate companies towards the places in America with no income taxes and low property taxes over the next several years.” 

Several developers I spoke with also were concerned about the Green New Deal and how the Biden Administration’s energy, climate, and environmental policies could add further headwinds to real estate’s recovery. Others like Fifth Wall’s Wallace, however, see nothing but opportunity in the industry’s coming sustainability.

“The real estate industry will have no choice but to decarbonize its assets eventually and I think COVID will accelerate this,” Wallace tells me, with the kind of confidence that comes from someone who knows something the rest of us don’t. “Rough estimates show that the real estate industry has only invested $94.6 million into climate technologies over the past 10 years, yet decarbonizing the U.S. economy will require more than $50 trillion in investment. Given that the real estate industry is responsible for over one-third of greenhouse gas emissions, we’re talking at least $15 to 20 trillion needed in climate tech investment to decarbonize global real estate. This is what will be required of the real estate industry to keep up with local, and now federal regulations, as the Biden administration is already bringing the U.S. back into the Paris Agreement. But we shouldn’t see this as negative. At the end of the day, clean, intelligent, sustainable buildings are cheaper to operate, easier to insure, and more bullet proof to shocks like COVID and the energy grid failures that just happened in Texas. While the industry as a whole might be leery of regulations, the forward-thinking companies who take a proactive approach to decarbonizing their real estate assets could add anywhere between $3 to 10 trillion of EBIT to their bottom-lines by embracing the change ahead of their competitors. The pandemic for a lot of people was a reminder of what an important goal this is.”

So with so much uncertainty still, far fewer answers, and more opportunity for innovation than there’s been in a generation, what happens next?

For the people who’ve played the real estate game at a high level for years, COVID-19 was never an Armageddon, and the swiftness of it all wasn’t unprecedented. Sometimes people with short memories forget that the Great Recession was triggered overnight by cheap money, Fannie Mae, and something that no one outside of Wall Street had ever heard of before called mortgage-backed securities. And eventually everything returned to normal.

For most of those same people, it shouldn’t come as a surprise then that pandemic was more of a reminder than an accelerant. It reinforced that real estate that’s solid is also essential—like houses, apartment buildings, hospitals, day care, supermarkets, data centers, and places to store stuff. It was also a reminder for many that real estate wealth rarely comes from playing the short game.  

At the same time, the pandemic has created the environment for cross-pollination between previously siloed stakeholders within real estate that likely would have taken another decade to evolve organically—along with the potential to transform the industry permanently.

“I don’t believe that there ever really was or is a normal in real estate as trends consistently evolve and as developers we have to constantly be rethinking what’s the best and most efficient use of space,” says PMG’s Shear. “We always have to be aware of what’s happening, what’s about to happen, and what could happen. We’re always trying to envision what ‘normal’ will be years from now so that we can use that information to predict and plan smart building design and technology now.”

Notwithstanding a global pandemic that no one predicted, that may well be COVID’s last legacy: re-realizing that normal is a constantly moving target.

 “Ultimately, I think there’s a new normal that lives in between the world that we once inhabited and the world that we are living in now,” says Alpaca’s Freedman. “New habits have been formed, lives have gained a different perspective, employers have learned how to run their businesses in a distributed and virtual world, and all these things will affect and ultimately define our new normal.”



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