Habits are formed in 21 days.
So, in the more than three weeks of changing the way we do things we have changed everything, forever. The worldwide lockdown may prove one of the most interesting sociological experiments ever undertaken and in time will yield some very interesting revelations. For now we can stick to what we know about humans. We are creatures of habit. We like consistency, it allows us to plan, to remove the unknown and to feel like we have some agency in our lives. For the sake of brevity we won’t dive into these at any depth, it’s enough just to understand the ways we work and how those ways have been inexorably disrupted.
In mid-April I was talking with a good friend who is a broker in New York City and he expressed how much he just wanted to get “back to normal.” To “get business rolling again.” Here’s the thing: business didn’t stop. It changed dramatically but it didn’t stop. If you review the closed transactions from all over the country you will see many deals that closed (sales and leases) during the lockdown. Is it fewer than “normal” sure but just because you find yourself standing around with nothing to do doesn’t mean the industry has stopped. It means it changed and left you on the side. Will it come back and pick up again? Maybe, maybe not. Either way it’s not about the hand you’re dealt but how you play it that makes all the difference.
Every generation that offers wisdom to the next generation in this business will tell you that the ‘easy money’ was “all made twenty years ago.” This is a cute way of expressing the idea that things changed and the older generation did not change with it. It was ‘easy’ because it was well understood. The new generation has it ‘harder’ because the older generation does not fully grasp how it works.
This idea is critical because the shift we are going through right now is going to inexorably change the way commercial real estate looks and acts. Offices cannot operate as before with the old metrics of a certain number of people per square foot; retail has been shattered and will take decades to recover anything that even looks like the way it was in December; even industrial has had to modify its methods and requirements in the face of the virus.
All of these changes ripple through every part of the industry. Changing the financing; the way contractors are building out spaces; how properties are valued and of course changing how commercial real estate is transacted.
Consider that for a period of time during the lockdown there was no way to meet with a notary to validate a signature in order to close a deal. That’ll throw a little wrench in things. You couldn’t notarize a sales contract on Zoom. Inside of two weeks a solution was devised and now it is possible to remotely notarize documents. Changes like this, large and small, are rippling through the industry and the winners will be the ones who can adapt quickly. All of the changes are not temporary or reversible they’re the way business is now being done, the new normal.
We don’t like change. It forces us to adapt to modify things. To learn a new way. To look at our business differently. The new normal is change. The volatility we are seeing and will see in the coming months and years will have many people pulling their hair out and throwing in the towel. There are piles of loans on commercial properties that have already been put into workout programs. There will be many, many more. That same volatility provides the opportunity. It just doesn’t look the same as it did six months ago.