How COVID could affect the buildings around you
Lesson summary
Hi there, thanks for joining us for another exciting Plain English lesson. I’m Jeff; JR is the producer; and this is Plain English lesson number 279, and the full lesson, including the free transcript, can be found at PlainEnglish.com/279.
Coming up today: Look around as you walk through a city or drive through the suburbs. What you see is the product of real estate investors: the ones who build and buy the big buildings around us. What happens to the owners of those buildings will affect us all because we are, well, users of those buildings. So in today’s lesson and in Monday’s lesson, we’ll talk about the impact COVID is having on the buildings around us and on their owners. In the second half of today’s lesson, we’ll talk about the phrasal verb “to make up for.” And we have a song of the week as well.
Malls and hotels are suffering under COVID
The coronavirus and the subsequent pandemic have already made a big mark on the world economy, but one slow-moving industry is also likely to change: commercial real estate. In the US and Canada, we say “commercial real estate”; in Britain and Australia, they say “commercial property” but we mean the same thing: the market for developing, buying, and selling big buildings like offices, shopping malls, warehouses, apartment towers, and the like.
By its nature, real estate changes slowly. It takes years to build a building; it can take months or years to renovate one, too. In the wake of the pandemic, the world’s landlords scrambled to make short-term changes to accommodate social distancing. But the pandemic is likely to lead to changes in the big buildings we see around us, in the city and in the suburbs.
Let’s start with the hardest-hit sector of real estate: hospitality. Hotels are being clobbered. Hotels rely on a mixture of leisure travelers, business travelers, and big meetings and conventions. Hospitality is a cyclical business: there are high highs and low lows. But hotel owners can, to some extent, make up for a shortfall in business travel by attracting more leisure travelers, and vice-versa. Not this time: every type of travel has virtually stopped, all at once.
Travel will come back in the long run, but the long run may be very, very long: too long for some hotels to survive. Many businesses have taken up online training and online meetings. They will be reluctant to spend as much on business travel in the future, now that employees have gotten used to meeting online.
Leisure travel may be different, too. Travelers may be more comfortable taking vacations closer to home. That could mean big international destinations suffer. There is one bright spot amid all the pessimism: if travelers value cleanliness, they will probably trust established hotel brands with clear sanitation protocols over Airbnb rentals.
Next up, retail. Perhaps half of the world’s retail tenants have stopped paying their rent during the quarantine. That leaves shopping mall owners in a bind: in ordinary times, they could evict a non-paying tenant and look for a replacement. But in the quarantine, there are no replacement tenants available. Many of the shops that closed for the quarantine will not reopen. In America, large department stores like JC Penney and Macy’s were already dying a slow death. Many of those stores will not reopen, leaving shopping malls with hulking empty boxes. The smaller tenants like clothing boutiques rely on the traffic the anchor tenants attract. Many of them have the right to cancel their leases or pay less rent if a big tenant goes dark. The domino effect can easily spell the demise of a big mall: after all, who wants to go shopping in a mall if half the spaces are empty?
Shopping mall owners are searching for ways to forestall this negative spiral. They don’t have many great options. Prior to the coronavirus, they were trying to attract “experiential” tenants like fitness centers, movie theaters, themed restaurants, and comedy clubs to fill the spaces vacated by big department stores. The problem now is that many of these have fallen out of favor in times of social distancing. How many gymgoers have grown accustomed to working out at home? How many moviegoers are nervous about packing into a crowded theater? AMC, one of the world’s biggest theater chains, is already struggling.
We talked about the shift to direct-to-consumer brands in Lesson 237. Retailers like Warby Parker for eyeglasses and Casper for mattresses have found ways to thrive without opening hundreds of stores in malls. Many retailers have shifted from stores that have a lot of inventory—where you can take your purchases home with you—to a showroom model. In a showroom, you can see one of everything, and place an order to be delivered to your home. Retailers that operate on this model don’t need as much space, further squeezing retail landlords.
Malls were struggling prior to the pandemic, as consumer preferences shifted away from the big mall with 200 stores. Many shopping malls will not survive COVID. Some estimates say that America might lose over 300 malls. They will close and, hopefully, be demolished or redeveloped into something different.
The one corner of retail property that has done well is local shopping centers that serve basic needs, including grocery stores and pharmacies.
Today has been doom and gloom, but the picture on Monday will be a little brighter. We’ll continue this topic and talk about offices and warehouses.
Reminder: Turkish and Polish translations available
Well, that wasn’t bad. I was able to go 278 episodes without talking about my own professional area of expertise. In my job outside of Plain English, my industry specialty is commercial real estate. But here in number 279 and 280, on Monday, I hope you’ll indulge me a little bit as I talk about the industry that I’ve been working in for over 15 years now.
Hey, remember if you speak Turkish or Polish, then you have a whole new way to enjoy your favorite English podcast. That’s because we’ve started translating the hardest words and phrases from English to Turkish and Polish for you—so you never have to press pause and look up a word in a translator. That’s included in our Starter and Plain English Plus+ memberships. You can read more and join those at PlainEnglish.com/join.
Learn English the way it’s really spoken
