The commercial real estate world was already changing as people moved away from shopping at retail stores and toward online retailers like Amazon, but now that pace has quickened.
More people are working from home than ever before, and because of concerns about COVID-19, shopping habits have shifted from in person to online. While this trend will have a negative impact on buildings and retail stores, it will have a positive impact on suburban rental communities and housing. To accommodate working at home, people are moving out of congested downtown developments and renting larger apartments in the suburbs, where there is space to create a separate home office.
The COVID-19 pandemic will also continue to help sales at online companies like Amazon, as many retail outlets were closed by government mandate, and even when they reopened, people remained fearful about going out to them.
According to the online commerce research firm eMarketer, Amazon has:
- 67 percent of the online books, music and video market
- 46 percent of the online computer and electronics market
- 45 percent of the online toy market
- 34 percent of online furniture sales
Amazon is in a position to take over any industry that sells retail goods that can be purchased online — and there aren’t many that can’t be. Amazon Prime is so user friendly that it doesn’t make much sense for a person to get into their vehicle and drive to a store anymore when with the click of a mouse, they can order whatever they want and have it delivered directly to their doorstep — no contact required.
I think the retail real estate industry is on the brink of a major overhaul. The malls that have the best chance to make it will be ones that create an experience for shoppers. It will become more of an entertainment experience rather than just going in, buying something, then leaving. Retailers will need to create a connection with shoppers, not just offer the experience of shopping in a warehouse, and retail centers with services that you can’t buy online will also continue to be successful.
And in commercial office space, real estate owners will have to rethink how they market their office space to make it more attractive to those who feel they no longer need a physical location.
What Amazon means for housing
I don’t believe the housing industry will be directly affected by Amazon, but it will continue to integrate its products into homes. Services such as Alexa, with its ease of use, are now being installed directly into routers through a company acquired by Amazon called Eero, allowing it access to the consumer’s buying behavior.
In addition, the company owns Ring, a home security service, giving it even further insight into the lives of its customers.
I feel that even if Amazon entered into the real estate industry, we would be able to compete, as one of the most important aspects of our customer experience is creating speed and flexibility, along with a personal connection.
But with the pace of today’s society, you and your employees must continue to innovate to stay relevant in the marketplace to ensure you don’t become obsolete.
Brian Schottenstein is president of Schottenstein Real Estate Group