D.C.'s Real Estate Jobs and COVID: Where Does the Commercial Market Stand?
The commercial real estate market (CRE) in the D.C. metro area has historically depended on leases, primarily from the federal government. Generally, the market has consistently kept real estate brokers and agents busy.
Let us take a look at how the D.C. region's CRE sub-sector performed before, during, and what it will likely look like after the COVID-19 pandemic is over.
Before the pandemic
In recent years, significant commercial construction has been occurring across the D.C. area. Northern Virginia has become a hub for data centers, Amazon expanded its footprint, and developers built reimagined residential housing throughout D.C., Maryland, and Virginia. Overall, regional construction keeps the CRE job market active and investors actively seek D.C.-area opportunities.
Despite the CRE market boom, the job industry has its problems. The workers in this subsector are largely from older generations. A Deloitte report highlights an employee demographic imbalance when compared with other industries, noting CRE companies have lagged in the recruitment and retention of millennial and Gen Z talent, stating they "needed to revamp and upgrade talent processes before the pandemic." Firms' lack of modernization and technology integration on the HR front also played a significant role in this disproportion.
The arrival of COVID-19 only accelerated these issues as technology turned out to play an integral role for businesses to survive the pandemic.
During the pandemic
Not unlike the rest of the country, the COVID-19 pandemic sent the DMV region into chaos and created a disruption unlike any others in the past. The sudden and unprecedented closures and interruptions to commercial businesses led to much uncertainty across several industries, including CRE.
Unlike its residential counterpart, market conditions worsened for the CRE market. In December 2020 the Washington Business Journal reported commercial property sales had "fallen off a cliff,” down 33.7 percent in October 2020 from the previous October. Value of transactions also significantly dropped. While home values soared, commercial values sunk. City officials considered "drastic alternatives" to fill unoccupied office space, including attracting university researchers, medical professionals, and converting commercial space to residential. Downtown D.C. is experiencing its highest commercial vacancy rate in over 20 years. Other CRE markets in the suburbs may not experience these same pains.
This, coupled with the talent problems the CRE industry was already facing, "exposed" the CRE's "archaic approach to talent," says Deloitte.
Looking toward the future
The pandemic blurred the line between personal and professional lives and significantly impacted how people view physical spaces. Going forward, this could have a dramatic impact on CRE. Ultimately, workers may need to adapt as market conditions evolve.
It is possible companies will shift to remote operations to reduce their operational footprints, commerce companies reduce their need for physical space and shift to e-commerce, and employees seek to work for companies that allow remote work options. Any of these can impact CRE demand and, eventually, filter down to sector jobs. Employers preferring in-person operations may also seek expanded space to account for a desire to have physically distanced layouts which would positively impact CRE.
Regardless of how the market shakes out, moving forward, employers are going to seek tech-savvy employees. AI, robots, and other technologies are steadily making inroads in real estate which may lead to some job roles ceasing to exist, creating an overall paradigm shift. On the other hand, technology offers the opportunity for workers to retrain and pursue new jobs that potentially emerge during this transition. COVID-19 "hastened the need to increase digitization, automation, and virtualization of work." (Deloitte)
Going forward, CRE jobs will require less dependency on traditional skill sets and more on technology. People working in this industry will need to keep this in mind, especially since the U.S. Bureau of Labor Statistics predicts only 2 percent growth for real estate brokers and agents through 2029.
As technology takes over mundane tasks, those who do not adapt and embrace tech may find their job security at risk.
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