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The Impact Of Covid-19 on Commercial Property

The Impact Of Covid-19 on Commercial Property

The lives of people all over the world have been completely altered as a result of Covid-19, with businesses struggling to cope with the uncertainty that comes with a global pandemic. Commercial property has been strongly impacted, particularly office spaces and high street shops, as workers and shoppers alike completely withdrew for months on end. This brought about an interest in working from home and shopping online, which has potentially altered the way that we will work and shop from now on. Here we will discuss how commercial property has been impacted, how the lack of legal enforcement has made government interventions simply inadequate and finally what the future will look like for these struggling industries. 

What Exactly Is Commercial Property?

Commercial property refers to any kind of real estate that is used for businesses purposes, for example office buildings, high street shops, supermarkets and many more. Here we will mainly be looking at office buildings and high street shops as they have arguably taken the biggest hit as a result of Covid-19. In the past, investing in commercial property has generally been seen as safe, as although the upfront investment is far more than residential real estate, the returns are also much higher. This was until the high-street began to collapse as a result of rising business rates and inflation, an increase in e-commerce, declining wages and large shopping centres. An industry that is already grappling to survive then faced closure for months on end as a result of the pandemic, with the likelihood of a permanent decline. Contrastingly, an industry that up until a few months ago was thriving more than ever now faces permanent, substantial changes, as the owners of office spaces are facing a similar collapse as a result of Covid-19. 

Major Changes

All kinds of commercial companies have been trying to adapt to the changes brought about by Covid-19 for months now. For retail shops, they had to quickly shut their doors and find ways to be innovative in response to the pandemic. Whilst some companies struggled desperately to increase the demand for their products, other sectors saw a huge spike in demand and were forced to quickly adapt to avoid major issues with their supply chain. For example, supermarkets had exponential problems with products consistently being out of stock. Businesses in the health and fitness sector also saw a vast increase in demand as people began working out from home and had their gym memberships frozen, leading them to invest in home gym equipment. The uncertainty that the pandemic created completely threw the entire commercial industry and led many shoppers to adjust to shopping online. Many people perhaps saw the benefits of this and may continue to shop online, pushing high-street retailers into more trouble. 

Office spaces have also been hit badly by the impact of the pandemic. As workers were forced out of offices at the beginning of lockdown, people began adjusting to working from home. People began to see the benefits as they save significant amounts of time and money on their daily commutes, or lack of now! Other workers are enjoying utilising their spare time to spend time with their families or have noticed significant improvements in their mental health as they have space to concentrate in their own home. Whatever people’s reasons may be, the common theme here is that people are enjoying working from home and many will want to continue to do so. Clearly this creates a problem for those in commercial property auctions, who are reliant on companies paying huge leases on office spaces, which are unlikely to continue due to the demand for flexible working. 

Government Code of Practice

A slight sense of relief was instilled in commercial businesses when the government announced in May that they were working with businesses and certain trade associations in order to support industries that were in trouble. The code had been set out to last for a year, with the aim of producing fair discussions between tenants and landlords. Yet, the flaw here is that there is no current legal enforcement as it is just a voluntary practice that won’t really change the current system of landlord/tenant negotiations. The government website states that the code will “provide clarity for businesses when discussing rental payments and to encourage best practice so that all parties are supported”, with the term “encourage best practice” reinforcing that there is no evidence of legal implementation. Some key elements of the code, including the encouragement of parties to act reasonably and in good faith, have been criticised as they simply reiterate the guidance already released by the government, encouraging false hope from many struggling businesses. The code is supposedly in place alongside the financial packages that have been offered to businesses, yet with these aids nearing the end, questions are being asked about what the future holds for these industries. Although this code is a step forward in the government’s acknowledgement of the struggles for the hospitality and retail industries, it fails to offer any guidance that hasn’t already been released. The mere encouragement to contact lenders and ask for flexible support is insufficient in the current climate. 

Moving Forwards

So, where do commercial companies go from here? For the owners of office spaces, there is likely to be a migration towards flexible work spaces. Whilst these work spaces are not currently appropriate as many different people would be sharing the work space, once Covid-19 is under control, flexible work spaces are likely to thrive. These are large, open-plan office spaces that multiple companies can make use of, enabling employees to dip in and out of the office when required. This may be for an important meeting or simply to reconnect with co-workers. For employees, flexible work spaces offer the best of both worlds as they can find a routine that works best for them, made up of a combination of working from home and being in the office. Additionally, business owners don’t need to commit to traditional leases, as flexible work spaces usually consist of monthly rolling contracts. For leaseholders of office spaces, this is likely to be the way forward. Transforming traditional office spaces into flexible shared offices might be a drastic step, but could potentially save a lot of money in the long run. Offering additional services such as free drinks, communal fitness events and extra security can increase the value of your space and thus, increase your profits. If you’re in a position to be innovative and try something new, creating a flexible office space may be the way forwards. 

For shops who are facing closure, building an online presence for your business and focusing on e-commerce might be a strong step to take next. Align your business with consumer buying behaviour by investing some time and money into taking your business online, which could create amazing opportunities for you, as well as saving significant amounts of money on monthly leases. If you’re unsure where to start, Google offers a range of free courses through their Google Digital Garage, such as their Fundamentals of Digital Marketing Course which includes a thorough guide on e-commerce. This will give you a step in the right direction to help you understand the best initial steps to take, as well as how to market your business well online. 


The high-street and commercial real estate industries have been hit hard by the pandemic, to say the least. Companies have had to completely reinvent in order to try and stay afloat and are likely to have to continue to do so as the pandemic has brought about potentially drastic changes to how we work and shop. With flexible working and e-commerce becoming increasingly popular, especially as a result of Covid-19, companies will need to innovate in order to survive and hopefully thrive in these altered conditions.

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