Insurers should know about this commercial real estate trend
The pandemic economy is accelerating property repurposing. Shopping malls in particular are being primed for new uses.
Shopping malls were already struggling before the COVID-19 pandemic and subsequent virus mitigation efforts shuttered them for months — and some of them for good. Now that businesses are beginning to reopen, real estate experts report that large retail centers are increasingly being turned into mixed-use venues, a trend that will require fresh insurance solutions.
Mike Krueger is a partner at Newmeyer Dillion who predicts that COVID-19 will force “some very creative repurposing of properties.”
In some places, shopping malls have even been repurposed into medical facilities. “At this stage, we don’t even know what the best use of some properties will be,” Krueger says. “You may have a J.C. Penney’s in a huge building that could be perfect for an oncology department or maybe perfect for outpatient medical treatment… The rest of the stores might still be vacant, but that one building is great for that [a medical use].”
Malls may have other advantages for conversion to other uses. For instance, a large mall will be ADA compliant.
“It’s going to have elevators and escalators,” Krueger says. “Maybe an abandoned mall is a perfect opportunity to put a nursing home or some assisted living facility because you already have all these access points.”
Malls also tend to be near public transit and bus lines, and they provide plenty of space to create completely independent units that are not on central air, if ventilation is a concern, according to Krueger. “I think we’re still waiting on a lot of guidance,” he says. “The insurance companies are really going to be the ones that are going to dictate this.”
Creative space solutions
“We are now looking at a complete revolution in what retail and commercial spaces are going to look like, especially in the restaurant industry,” Krueger says. “Depending on where you are, you’re going to have different counties with different restrictions. At least in the Bay area, we know that the post-COVID-19 restaurant experience is not going to be the same as pre-COVID-19, namely and the occupancy space.”
Offices are another place ripe for change. While teleworking had been growing steadily as a trend for a while, Krueger thinks the news that Twitter is allowing its employees to work remotely indefinitely will spark discussions at a lot of large firms in the San Francisco Bay Area.
“For large tech companies that are renting out giant spaces in downtown San Francisco or anywhere in the Bay area, anywhere where commercial real estate is very expensive,” Krueger says. “Now, all of a sudden, you see some of the most visible tech companies out there saying, ‘We don’t even need our commercial space.’ I think you’re going to see a significant change around what that space is going to be useful and how that space is being used.”
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