As we enter Spring 2021, commercial real estate investors are on the hunt to understand signs of the “new normal”.  Seeking signs of new norms in a post-COVID, pre-vaccinated world is quite understandable – yet at its core, flawed.

There is no “new normal” – in fact, any new normal is simply perpetuations of the “old normal”.

Yes, there will be some changes.  Washing your hands a bit more.  Fearing to sneeze in the grocery store.

Last month I wrote that Stability is Around the Corner, citing – and supporting with data – that after Class A office rents cratered (25% decline) in Manhattan after September 11, 2001, they surged back (65% growth in 5 years) once life went back to normal. Workers returned to the demonized high-rise buildings which were thought to never be occupied again.

Human nature – much like nature, is a powerful force. Yet, unlike nature – it does not change quickly.

Quite simply, fundamentals of human interaction, self-interest, and social constructs evolve very, very slowly.

How do I know, you ask?

Three examples of how the renter-age cohort (20 – 35 years old) people behave:

  • Tinder – geospatial preferences map to lustful lives
  • Top Ramen – purchasing necessities is based on pricing, not desire
  • Two Martini Lunches – societal advancement is locational

Predictions of big changes – or a “new normal” – in how we behave and interrelate will prove false in the next 24-36 months.

The question is, will you act presciently enough to seize the opportunity prior to others realizing the false promise of a new normal?

What does Tinder Tell Us?

For those unfamiliar – or claiming lack of familiarity – with this online dating app, the premise is quite simple. An algorithm suggests potential romantic “opportunities” based on who is near you.

Yes, locationally near you!

Similar to Yelp geolocating that gyro you desire, or that dentist you immediately need – Tinder helps you along with all of your dating needs in a nice, neat, and tidy geospatial way.

If there are not enough potential dates – many people literally move to a different location.

Don’t believe it’s true, ask members of the younger generation in your office.

Is this phenomenon new?

Absolutely not.

Leaving your small, one-horse town to find opportunity – economic, professional, and especially romantic – is as old as time itself.

Think Tinder is not on to something?

An offshoot dating app from a former Tinder employee just minted the World’s Youngest Self-Made Woman Billionaire… kudos to Whitney Wolfe Herd!

At the beginning of the COVID-19 pandemic, a mentor introduced me to the concept that “people follow their sex lives”. The more I’ve thought about it, the more it makes sense (thank you for the tip, MC!).

Let’s pretend for a second that I used to watch Sex in the City. And let’s further pretend that I watched the episode(s) wherein everyone races off to the Hamptons for the summer.

Why did everyone follow one-another to the Hamptons? Think about it.

Where did they all go when summer was over? Right. Back. To. The. City.

Similar with San Franciscans and Lake Tahoe. Seattleites with Chelan.

Yes, maybe droves of Millennials are COVIDing in Missoula, Fort Collins, or name-your-resort-town.

Give it some time; once the summer-of-COVID is over, they are heading right back to the cities.

You can bet on it!

Top Ramen or Sushi?

When I was in college I was introduced to sushi. It was amazing, delicious – and expensive (it was the 1990s).

My sushi outings were generally reserved for parental visits and special occasions.

Like many college students, the necessity of eating on a budget relegated me to meals based more on price than desire.

At the time, a crowd – and budget – favorite: Top Ramen.

How do my collegiate eating habits relate to commercial real estate, and more particularly apartment investing?

Simple, smaller units are the Top Ramen of the rent roll menu.

Ever since the United States won World War II and embarked on the great suburban experiment, everything grew in size.  Houses, cars, backyards – and especially apartment units.

The 1990s marked an inflection point and, in each for the last four decades, the average size of the apartment unit shrunk 100 square feet.

Source: Kidder Mathews Research


Do people want to live in really small spaces?

Likely not.

Do college students prefer Top Ramen over spicy tuna rolls?

Likely not.

In Seattle’s hardest hit urban neighborhoods, rental rates declined 15% – 30%.  Accordingly, renters are able to get a sushi-sized apartment units at Top Ramen prices.

What will happen when hordes of Tinder-using Millennials return to the city?

It’s quite simple- supply and demand will reset prices.

There is no “new normal” of people desiring larger units. This “desire” never abated.

Pricing increased.  It will again.

Demand for small units will return to pre-pandemic levels. And increase from there, just like every other urbanized city on the planet.

Do You Want to Join Me For Lunch?

How cool might it have been to be a young advertising executive seated near Don Draper’s office?

“I’ve got a meeting with Warner Brothers at Tavern on the Green, I need you to join me.”

Opportunities abound when you sit outside the bosses’ office.

Times have changed and the Two Martini Lunch may have morphed to the PowerPoint pitch over Tender Greens delivered by Uber Eats.

However, proximity to the boss – serving as an easy-to-access sound board for ideas, whiteboarding sessions, and last-minute invites to client proposals – is the surefire way to get ahead in one’s career.

Societal advancement is locational.

Whether you mingled among the Royal Court in Elizabethan England or helped your Managing Director complete a proposal during an all-nighter at a technology company in Silicon Valley, physical proximity is key.

When it comes to prescience in commercial real estate investment, I can’t think of an icon – and early-mover – more relevant that Sam Zell.

Quoted in a February 2021 news article, Mr. Zell posits:

“I think that most of the discussion about working from remote locations is going to turn out to be irrelevant. We are social animals. We interface with each other. We create progressive results from one-plus-one-equals-three. As soon as the central business districts are back and alive and vaccines are pervasive, you’re going to see the office space market go back to where it was before.”

Source: Connect CRE


Get in the market; not too long from now you’ll be glad that you did!



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