The COVID pandemic has accentuated myriad vulnerabilities that professionals and scholars in and out of the real estate industry are analyzing, debating and looking for immediate and long-term solutions.
“We are living in a world of uncertainty,” said Debra Moritz, executive managing director, Cushman & Wakefield. “Yet uncertainty is at the heart of creativity and the creative solutions that will come.”
Moritz was one of four professionals who took part in Thrown for a Loop: How a Post-COVID Transformation of Employment and Commuting Could Change the Chicago Commercial Real Estate Market. The program was 16th annual program sponsored jointly by the Real Estate Center at DePaul University and the Chaddick Institute.
Other participants in the program included Steve Brown, project leader, HNTB; Chris Koop, transportation practice leader, HNTB; and Linda Goodman, principal, Goodman Williams Group. Joe Schwieterman—director of the Chaddick Institute and the Charlie Wurtzebach, Douglas & Cynthia Crocker Endowed director of the Real Estate Center—facilitated the program.
The issues at the intersection of real estate and transportation are not unique to Chicago; they extend throughout the U.S. and across the globe.
Brown’s presentation showcased how significantly COVID-19 has impacted transportation patterns, in Chicago and across the country. He pointed to a bottoming out of ridership in April for all transportation modes. The areas that were hit the hardest—and remain handicapped—include travel by commuter rail (such as Metra in Chicago) and urban interstates.
While bus traffic also has declined, the fall in traffic was less than other transportation modes.
Brown said, “The profile of the average bus rider is very different” than any other mode of transportation. “The footprint of service is also very different.”
It was not surprising then that the busiest CTA stations in June 2020 (versus February 2020) were tied to those with significant connecting bus routes.
“The Loop no longer reigns supreme in terms of where people are traveling,” Brown said.
Koop’s presentation showed that while we live in uncertain times, one of the things for certain is that there is wide discrepancy in how the workforce could change in terms of where it works.
According to Global Workplace Analytics, 56 percent of the workforce have jobs that can be performed remotely at least some of the time. Taking that concept a step further, Koop noted that according to a McKinsey Global Institute report, executives expect that in a post-COVID world, 15 percent of executives expect that at least 10 percent of their employees will be working remotely. Before the pandemic, that number was approximately half of that—8 percent.
A CBRE report likely muddies those waters. In a workforce sentiment survey, conducted June through August, 29 percent expected an equal balance of working from the office and working remotely. Similar numbers were recorded for working fully remote, 28 percent, and mostly remote, 28 percent.
Based on those figures, Koop says that the implied reduction in commuter travel demand is 65 percent, leading him to suggest, “Metra may struggle to get back beyond 80 percent of pre-COVID ridership.”
Koop said there is no easy answer but offered several opportunities that are available to rebuild transit ridership, ranging from Infrastructure stimulus to expand high-quality transit networks to refocusing commuter-oriented service to a frequent, all-day service model.
Koop noted that the 44 percent of people riding buses have only helped to accelerate trends that have been building over time. “Rebuilding the transit system to better serve essential workers will better serve everyone,” Koop said.
In tandem with the ridership statistics as well as the sentiment of business leaders, HR departments and employees, Moritz noted trends that already were taking hold pre-pandemic, including population growth that has been leaning toward the suburbs.
Moritz focused on the four primary categories of what occupiers want: talent, proximity, experience and optimized space. She also shared how Cushman & Wakefield is helping tenants reimagine their space uses based in part on an evidence-based evaluation of remote work.
She noted key findings that such as 75 percent of people who say they are effectively collaborating and focusing at home while 50 percent say that they struggle to connect to company culture. Among the younger generations, 70 percent have various WFH challenges such as inadequate space and caregiver issues.
Perhaps one of the most telling statistics is that 73 percent of people are looking for expanded policies that will be spread across office, home and other options. She concluded that, “the office will remain a critical driver of culture, learning and personal connections.”
Goodman acknowledged, “What happened in 2020 is shocking.” Adding further context to the situation in Chicago, and much of the country, she added, “Going forward, we’re only in the third inning.”
She further commented a belief, reinforced by one of her slides, that retail trends already were changing, and that the pandemic has only accelerated those changes. With an underlying sense of optimism she noted that when the density of workers return to the Loop, so too will retail and restaurants.
Goodman noted that even though the hotel and hospitality industry have taken a beating, there is a lot of pent-up demand for travel once the pandemic is under control. In other words, temporary closures and low occupancies are a concern, there are new developments in varying stages of the planning and development pipeline.
Goodman also pointed to a number of megadevelopments taking place in Chicago, but not downtown, that over the long term will help to ease the pain that has been felt in the Loop. Among those developments that could become burgeoning hotspots for technology and life sciences are Lincoln Yards, Fulton Market and Bronzeville Lakefront, to name just a few.
Real estate, business and finance professionals often use sports analogies—like baseball—to describe the strength or duration of cycles. What remains to be seen is whether this will be a regulation nine inning game, or if we’re headed into extra innings.
Michael Millar is a Chicago-based public relations and communications specialist.