This Is the Altered Normal
Esri’s data on consumer behavior, demographics, and employment can help real estate adapt in the COVID-19 world.
CONTENT SPONSORED BY ESRI
The COVID-19 pandemic continues to necessitate unimagined change. The impact it has brought to our world would have seemed, for many, unthinkable at the turn of the year. Some refer to this change as the “new normal.” Really, however, it's the ”altered normal.”
We are experiencing significant alterations to supply chain, manufacturing, and education models. How families live together and apart, how and where we shop, the shape of our workplaces, the meaning of an essential worker, and every facet of recreation and leisure have seen major changes as well. While the sharpness of these shifts may make life and work feel like a new reality, this altered normal has been in motion for decades — and most of us have missed it.
Businesses most able to adapt in this pandemic are helmed by leaders who previously built into their thinking and strategic plans the ideas of disruption and digital transformation. These are strategic leaders who previously understood the forces and trends that were shaping the future, and grasp that the industry is ever-evolving beyond COVID-19.
After hitting a peak in February 2020, the United States officially entered an economic recession, ending its longest expansion in history, lasting just over 10 years. Other global economies are also suffering. This recession is different to those of before. How fast the economy has slowed, who its slowing is affecting, and its leading factors all distinguish it from previous downturns.
Jason Furman, an economist and professor at Harvard Kennedy School, described the current U.S. economy as being in a “medically induced coma.” Others highlight the fact that for many consumers and politicians, the remedy for the pandemic is an economic pause.
Whether the economy is paused or in a coma, the fallout can be seen in the significant changes in how people shop and dine today. As recently as March, the American Planning Association featured Taco Bell's plans to roll out 300 of their “Cantina” prototypes nationwide by 2022 — all without a drive-thru window. In the ensuing months of the pandemic, the drive-thru became a necessity. Municipal leaders who once championed bans on new drive-thru construction are facing today new, more complicated and competing priorities as they observe how shuttered restaurants have dramatically impacted the local tax dollar.
Consumer spending on food away from home has exceeded grocery outlets every year since 2015. According to the United States Department of Agriculture's Economic Research Service (ERS), in 2018, Americans spent approximately 10 percent of their total disposable income on food, both at and away from home. Grocery store and warehouse club purchases made up over 80 percent of all food-at-home purchases, according to USDA ERS and the Farm Bureau. Food sales at restaurants accounted for three-quarters of all food away from home spending, growing by nearly 30 percent over the past decade.
Esri provides commercial real estate professionals with detailed consumer behavior data on dining-out statistics such as restaurant visits, like-for-like propensity, habits, and expenditure on food away from home. This data can be found in Site To Do Business, which every member of CCIM Institute can access free of charge.
Site To Do Business provides business listings and labor force by NAICS code and age, as well as location quotient and unemployment rate, which are new in 2020. All this rich content, including monthly updateable retail POIs with visitation patterns from SafeGraph, are discoverable and accessible within Site To Do Business, ArcGIS Online, and Business Analyst.
New demographic content released in Site To Do Business in July 2020 includes data that reflects COVID-19-driven change. In the near term, the economic impact is prominent and measurable. In the long term, socioeconomic and demographic trends will likely be impacted and persist through 2025. Adjustments for COVID-19 are reflected in changes to net worth, employment, unemployment, home value, income, and tenure data.
This data uniquely positions CCIMs, compared to other real estate professionals, to quantify and communicate their knowledge of the pandemic's impact in their local market. For example, Colliers International recently analyzed the disruption that the pandemic has caused among East Pennsylvanian retailers. Those retailers at high risk for disruption include consumer durables, non-food retail, apparel, and automotive. Food and beverage, pharmacy, medical, and essential retail were low risk. By understanding such trends, changes across years, and current market conditions, CCIMs can better communicate with existing and prospective clients, tenants, and investors.
Mobility and the Workforce
Despite telework predictions since the 1990s, mass adoption of remote work before the pandemic failed to materialize in even the most technologically advanced businesses. Historically, adoption was hampered by lack of managerial support and negative expectations around productivity, teamwork, and cost of infrastructure. For many organizations, the pandemic has made working from home a necessity, leaving some scrambling to adapt while those who fully embraced digital strategies and remote work before are better equipped for the altered normal.
According to a McKinsey and Company report, “The levels of remote working have skyrocketed during lockdowns and are likely to remain higher than pre-crisis levels for some time.” The percentage of full-time employees working remotely has increased for IT, professional and business services, finance, and manufacturing to over 60 percent, according to their May report.
Consumer behavior and preferred engagement channels have also changed significantly. First-time digital channel users have grown by 20-30 percent in banking, entertainment, and grocers, according to the same report. Most U.S. consumers are using these services today, and McKinsey expects that 75 percent of first-time digital channel users will continue use them post-pandemic. These seismic shifts in workplace and consumer behavior are evident in the rapid adoption of takeout and off-premise dining, pickup and delivery, in-store collection boxes, and shopping services like Instacart. Executives are having to perform much faster assessment and implementation of innovative, modified, or alternative business models and operations.
The impact of remote work adoption is also non-uniform among real estate property types. To complicate matters further, the geographic impact of the pandemic and a community's economic resilience vary dramatically. Historic models and forecasts no longer apply — business leaders need to find and apply new data while assessing past assumptions, as patterns of supply and demand continue to change.
Many datasets can elucidate the altered normal and its dramatic economic and structural shifts. Esri publishes county unemployment data from the Bureau of Labor Statistics as part of the Living Atlas of the World. One powerful analytical view of this data reveals changes in the unemployment rate from month to month. The screenshot above highlights significant regional, state, and community-level patterns. For a longer-term view, Site To Do Business users can add the most current 14 months of unemployment statistics from BLS and other industry-level classifications — which are available as reports, infographics, smart maps, and multilevel datasets.
Undoubtedly, remote work is here to stay. Many organizations have found that their staff prefer it, and executives have discovered that fears about effectively managing remote teams and loss of productivity are unfounded. In addition, executives see potential to reduce real estate expenses and decentralize into smaller offices, suburban centers, and multifunctional centers. This has sped up a concept familiar to commercial real estate professionals: the delinking of talent from place.
Virtual teams and changing ideas about work are accelerating innovative corporate ideas about talent and workplace operations. These ideas will continue to impact the format, location, and size of offices, with in-office working increasingly linked to shorter commute times, nearby amenities, and workers placing greater value on physical office location or soft factors when choosing an employer. To secure the skills they require, businesses will need to adopt a new approach to attracting, developing, and retaining their workers. These prerequisites and preferences will be familiar to CCIMs — they are the tenets that underpin CI 102.
Esri has seen a dramatic rise in the use of 3D technology, virtual property tours, facilities management, automation, and AI among clients. Cushman & Wakefield provides their clients with data-rich, 3D property and markets visualizations. Its PRISM solution is a location smart app that empowers brokers — through combined use of 3D tools, location intelligence technology, market data, and modern user interfaces — to show clients what's next in real estate. Similar capabilities, at a smaller scale, can be created using Site To Do Business tools.
The altered normal is enforcing acceleration of the trends that have been transforming real estate for some time. Although the pandemic and resulting recession have created the sharpest, most impactful shifts in various industries and ways of living in modern history, the real estate industry has always been able to recover and adapt following market decline and disruption. It will prove its resilience once again, but success also depends on an organization's ability to innovate and apply the new digital differentiator: location intelligence. Tools such as data, maps and apps, and dashboards help you to analyze and contextualize clients and consumers, as well as market competition and opportunity.
CCIMs are distinctively fortunate — your earned designation has helped to develop skill in and knowledge of the technology and market insights that will keep you among the most distinguished professionals in the industry. You understand that all real estate is local. With the tools and data available within Site To Do Business, you will persist, look forward, and thrive in today's altered market.
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