Yahoo Finance Warren Buffett: Demand for office and retail space may drop 'fairly significantly'
The novel coronavirus pandemic will change the supply and demand for retail and office space, according to Warren Buffett, chairman and CEO of Berkshire Hathaway (BRK-A, BRK-B) at Berkshire Hathaway’s annual shareholder meeting.
Retailers and companies shuttered their doors, sending employees home to “shelter in place” across the U.S. From home, Americans have turned to e-commerce and work-from-home solutions, which could have a lasting negative effect on commercial real estate, says Buffett.
“It may be that what’s happened in the last couple months has accelerated the decline of those businesses, or their customers are developing different habits… There are businesses that were having problems before and that are having even bigger problems,” says Buffett.
Retailers are already struggling to pay rent during the pandemic. Major brick-and-mortar retailers including Subway and H&M missed rent payments in April, and landlords expect even more late payments in May. Even worse — Buffett says the retail industry might not bounce back after lockdown.
“People are developing different habits in retail, there's no question about that,” he says. “If you’ve owned a shopping center, you’ve got a bunch of tenants that don’t want to pay you right now, and the supply and demand for retail space may change fairly significantly.”
Companies may also start reducing the square footage of their office spaces, according to experts. As Americans adjust to working from home, companies are considering lasting flexible work policies that reduce the need for office attendance.
“A lot of people learned that they can work at home or that there’s other methods of conducting their business than they might have thought from what they were doing a few years ago,” says Buffett.
Buffett emphasized that despite shifts in consumer behavior, the American economy remains resilient. “When change happens in the world, you adjust to it,” he says.
In fact, according to Najla Kayyem, senior vice president of marketing for California-base retail investment group Pacific Retail Capital Partners, empty retail and office space will be repurposed into storage, fulfillment centers and multifamily housing.
Sarah Paynter is a reporter at Yahoo Finance. Follow her on Twitter @sarahapaynter
Read the latest financial and business news from Yahoo Finance
Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, SmartNews, LinkedIn, YouTube, and reddit.
More from Sarah:
Mortgage forbearance reaches close to 7% of loans: Mortgage Bankers Association survey
Coronavirus pandemic isn’t making home sellers lower prices: survey
Barbara Corcoran: Educated homebuyers can get the ‘deal of a lifetime’ right now
