REDEFINING LOCATION
of convenient , safe , and cost-efficient transportation have increased flexibility for a worker ’ s location . The DV and virtual access , therefore , may provide even more advantages to some locations .
Given the developments since the onset of COVID-19 and the need and / or desire to work remotely , do such safety concerns encourage more individuals to work remotely — both in the short term and long term ? Even when personal and public health concerns dissipate , will workers still want to work at home or at a distance from the office ?
Alphabet-owned autonomous vehicle company Waymo announced in March that it started offering fully driverless car rides to its employees in San Francisco .
A lot of speculation has focused on just how transitory and how much of these changes will remain the standard employment approach in the field . Will Zoom or other platforms be the standard interface for many meetings ? These and many related questions continue to be discussed as COVID-19 and new strains continue to impact private and public lives and businesses .
HAVE WE BEEN WRONG ABOUT THE IMPORTANCE OF LOCATION ? One of the most fundamental axioms real estate investors , homeowners , brokers , attorneys , financial advisers , CPAs , developers , lenders , mortgage brokers , appraisers , insurance agents , and all others who find themselves involved with real estate is location , location , location .
But have we accepted this principle of location for so long that we do not question it ? Should we question it ? Was location always very important — even crucial — in years past , but not as much now in some settings ?
If “ location , location , location ” was always foundational in determining where McDonald ’ s chose to open a new restaurant , is this still true ? While customers primarily chose to walk into a McDonald ’ s previously , it appears things have changed . The impulse to eat a hamburger is still there , but the dominant principle of location has changed because McDonald ’ s now reports that the drive-thru and delivery options from its stores are the stronger percentage of sales . Is location less important if McDonald ’ s moves further toward taking more orders for delivery ? Does this same issue apply to many businesses ?
Today , unlike 40 years ago , walk-in sales do not constitute the majority of sales at many McDonald ’ s locations , as the trend towards drive-thru continues . Of course , this change does not change the import of location , location , location . But what if , hypothetically , a huge percentage of sales of a given McDonald ’ s — at least since COVID-19 — starts coming from delivery ? How important is the location of the store now ? With delivery , one might argue that McDonald ’ s does not need to be on the best corner on the best street . ( Of course , location can still be a dominant factor for the store to provide the best spot for the kitchen to allow for the best delivery speed .)
Delivery has always been important for many fast-food companies , but it appears this trend will continue to grow . In one recent note , McDonald ’ s emphasized the importance of delivery .
• On a recent earnings call , McDonald ’ s CEO Stephen Easterbook said that delivery is the fast-food giant ’ s next “ big frontier .”
• The company ’ s customers are placing 10 McDelivery orders every second worldwide , Easterbrook added .
• In 2019 , McDonald ’ s delivery business is expected to generate $ 4 billion , or about 4 percent , of global sales .
• Some Wall Street analysts are echoing Easterbrook ’ s sentiment that delivery could be the next big growth opportunity for the company .
The delivery business should grow faster than previously forecasted with the use of DV .
As for location , what if the McDonald ’ s food is being cooked as a “ kitchen on wheels ” that moves to the destination where the food will be delivered ? How important is the location of the store , where the kitchen picks up supplies , etc .?
This same discussion of location can be raised for Starbucks and other establishments that are moving toward more and more delivery of their products . This delivery approach raises the question of how the factor of location will be weighed in valuing property going forward .
Have we accepted this principle of location for so long that we do not question it ? Should we question it ? Was location always very important — even crucial — in years past , but not as much now in some settings ?
There is no question that location impacts the income stream for most commercial properties . Thus , the factor of location remains important . But the entire concept of location — and the valuation of commercial real estate assets — will need to be rethought in light of the above changes .
Mark Lee Levine , CCIM , CRE , Ph . D . Professor and chair holder at the Burns School of Real Estate and Construction
Management , Daniels College of Business at the University of Denver
Contact him at mlevine @ du . edu .
Libbi Levine Segev , JD , MS , LLM Associate professor at the University of Denver Contact her at libbi . levine @ du . edu .
CIREMAGAZINE . COM COMMERCIAL INVESTMENT REAL ESTATE MAGAZINE 35