The State of Commercial Real Estate

Posted by: Economic Development Team on Thursday, July 8, 2021

The demand for commercial space—office, retail, hotel, industrial, and even medical —took a downturn during the COVID-19 pandemic, when measures were put in place to stop the spread of the virus. Social distancing, shutdowns, quarantines, layoffs, and remote work all had an impact on the way we work and the space that we occupy.

Charles County-based commercial realtor Anne Hooper, Owner of Hooper & Associates, said, “In general, what we found during the shutdown, and then initial re-openings, was that a lot of  buildings remained in a large part empty. Not necessarily vacant, but empty, due to teleworking or businesses not being able to fully open due to restrictions.” (“Vacant” means no one has possession of the property, but “empty” means somebody is paying for their space but not able to use it.)

During the pandemic, expensive bills were accumulating for both tenants and landlords. Hooper said, “We found, during the initial shutdown, that people were anxious to negotiate rent deferment or rental abatement for the period the government required businesses to be closed or partially closed.” She added that most local landlords were accommodating and negotiated some form of rental deferment, especially for tenants who were already in good standing before COVID.

In her experience, Hooper said most tenants were able to negotiate some sort of agreement with their landlord to share the burden of the empty space so that one party didn’t have to take on the cost of the mandates to close businesses and public spaces. However landlords often took a bigger hit because they ended up with the expenses of owning a property that had to be maintained and paid for, whether occupied or not. If the tenants ultimately could not ride out the closures, “some local landlords offered buyout agreements or early lease terminations and regained possession of the non-performing spaces,” Hooper said.

 

COMING OUT OF COVID, WHAT’S POPULAR?

Coming out of COVID, most businesses have found that teleworking -- or a hybrid version of teleworking -- is the future for general office users, so they’re downsizing and releasing space back to the market. “Now, the individual offices like the business centers are doing really well,” said Hooper. People who downsized or are telecommuting may still want a small space close to home. Larger office spaces aren’t being leased or reabsorbed in the market as quickly.

Coming out of COVID, there are apparently a lot of people wanting to start restaurants. “I can’t explain it ,” said Hooper, “but I do know there’s a high demand for the second and third generation restaurant spaces.” Second and third generation spaces are former restaurants that already have many of the expensive specialized features in place, like a commercial exhaust hood and grease trap, which reduces the start-up cost of launching a new restaurant. “I probably have 10 calls a week, wanting restaurant space,” Hooper said.

Another huge (but hard to explain) demand is for events spaces.  She said, “Again, it’s a phenomenon I can’t explain, but coming out of COVID, everybody wants to open an event space.” Automotive spaces are also of high demand, but this is due to the lack of available inventory or landlords that will allow this use within their properties.

 

PREDICTING THE FUTURE FOR CHARLES COUNTY

So, what will be different after COVID? Hooper says, “A lot of your [medical labs], spas, and other nonretail users will be going into retail spaces or spaces that have a presence for the walk-up market, where they have visibility. That wasn’t important before.” Health service providers will still go in general office spaces, though she’s seeing some of them venture into the retail space.

“What has changed on the medical front here, is that there are not as many independent sole practitioners,“ said Hooper. “Most are a part of MedStar Health, or the University of Maryland Medical System, or Kaiser Permanente, or other affiliations. Primarily, the big office use players are the medical groups that have recently expanded or come into the area.”

Another transition on the leasing front, is that Charles County is getting some national and regional recognition as the next best place to do business.  “They’re seeking space across the board,” said Hooper. “The retail sector is by far getting the most attention, but we’re also seeing demand in the office and medical sectors. The industrial market is extremely strong right now. Anything under 5,000 square feet goes almost immediately.”

 

A STRONG MARKET IN CHARLES COUNTY

On the sales side, sales are strong. There are also several redevelopment proposals in the pipeline. “We’re coming out of COVID with a very strong commercial market,” said Hooper. “We actually didn’t expect the commercial market to come out of COVID as strong as it has.”

One reason the commercial market is so strong could be related to commuters staying at home. During the pandemic, most of the workforce that commutes outside the county has been afforded the opportunity to work from home. Now there’s more of a need for amenities at home, like grocery shopping, doctors, and local services.

As we enter the COVID recovery, Hooper is optimistic. “There’s hope for Charles County commercial development and redevelopment. We’re coming out of COVID, and we’ve come with a very strong commercial market. A lot of people see opportunities in Charles County and the business sector.”

For more about locating your business in Charles County, contact the EDD’s Chief of Development, Taylor Yewell at YewellT@MeetCharlesCounty.com or 301-885-1340, x2200. Search properties on our Find a Property page.

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