“Shark Tank” investor Robert Herjavec said Thursday he believes the coronavirus pandemic has shifted attitudes about city living, altering the dynamics of the real estate market for years ahead.
“This is one of the greatest moves to the suburbs from urban areas since the 1950s or the ’60s,” Herjavec said on CNBC’s “Squawk Alley.” ”I recently moved out of Los Angeles into a suburban area, and I can tell you on a very personal level, my area is on fire.”
Herjavec, CEO and founder of cybersecurity firm Herjavec Group, said he feels that the changes in geographic preference will persist beyond just the height of the Covid-19 outbreak, predicting it will “be a trend for a while.”
“Everybody wants to leave large urban communities and move out into the suburbs,” said Herjavec, who also owns stakes in many small and medium-size businesses. “And I think urban real estate is going to hurt for a little bit.”
On Wednesday, new data showed New York City apartment vacancy in June hit a record high of 3.67%. More than 10,000 apartments listed on the market that month, an 85% increase compared with June of last year, according to a report from Miller Samuel and Douglas Elliman. The report largely attributed the spike to brokers being unable to show apartments due to business restrictions, as well as a general decline in demand.
Realogy Holdings CEO Ryan Schneider told CNBC on Thursday that company also is observing the coronavirus’ impact on where people are looking to live. The suburbanization trend has been the strongest in the New York City area, he said, but it’s not limited to it. The real estate company, which owns such brands as Coldwell Banker and Century 21, also is seeing the trend in California and other areas, he said.
“In every urban geography, the web traffic of people and what they’re searching for has changed versus 6 to 12 months ago to be much more suburban,” he said on “The Exchange.” “Even in the urban geographies where that rotation has not happened in the actual housing purchase and sales yet, the consumer searching is going in that direction and we continue to see that through the whole Covid crisis in the last three months.”
The coronavirus pandemic has brought about questions for the real estate industry, both in the commercial and residential sectors. On the commercial side, uncertainty persists about the long-term shift to remote work, which many companies adopted in March in a bid to slow the spread of Covid-19, and how it will impact demand for office space.
Hessam Nadji, CEO of Marcus & Millichap, the U.S.’ largest commercial real estate broker, told CNBC on Tuesday he believes urban areas will lose businesses and residents as a result of the pandemic. But, he said, it won’t be permanent.
“I think the next 18 to 24 months are going to show a lot of exodus out of central business districts, as you can expect,” Nadji said on “The Exchange.” “We’re seeing there’s a lot of office vacancy, for example, in the suburbs that have now been absorbed; there’s a lot of demand for rental homes that we’re seeing because people are fleeing especially hot spots like New York, but … you just have to keep a long-term view on it.”
Disclosure: CNBC owns the off-network rights to “Shark Tank,” on which Robert Herjavec serves as a co-host.