Trends accelerated by COVID-19

Nov 15, 2020

Companies are adopting fluid work from home policies and people have begun migrating away from dense cities.

With COVID-19 cases surging in the news, continued thinking about what this means for the future of the AEC industry and the U.S. real estate industry’s future has been a constant topic of conversation in M&A strategy discussions as firms define their growth objectives for 2021. Our M&A Next Symposium, which wrapped up last week, made mention of many of the impacts that COVID has had on dealmaking in 2020, from exacerbating the courtship process to changing indicators of future performance.

Before the M&A process, though, there are many strategic decisions that are made well in advance of identifying a target, and firms that plan to continue M&A growth next year and beyond would be well-served by studying how COVID could shape the AEC industry landscape and what that means for buyers and sellers.

As we presented in M&A Next, there are markets that will not be able to truly recover or understand what their future looks like until a vaccine is available, which we referred to as sitting in the category of “Knightian Uncertainty.” Knightian Uncertainty, named for famed University of Chicago professor Frank Knight, refers to the lack of quantifiable information about an outcome. Risk, however, uses quantifiable data (vacancy rates, rents, returns) that provide guidance regarding the future. Some sectors have data and history allowing us to assess risk and success, while others sit in the Knightian Uncertainty category.

The majority of our focus during the Symposium was on some of the market and geography trends that were accelerated by COVID, and others that were stopped or slowed. The cause of those changes are borne in both economic and cultural changes, and will reverberate for years in ways that will change the real estate market and, of course, the AEC industry. This will be the first in a series of articles that discusses these influences in more depth.

Today’s article will cover some of the trends that were accelerated due to COVID. Trends that were accelerated due to COVID include work from home, migration, generational considerations, municipal/state fiscal issues, safety/health, affordable housing, racial equity, and climate risk.

Work from home has been a trend since 2010, but the move from flexibility to fluidity regarding the location and nature of the workplace will impact the office market, but, more importantly, will drive other markets. This also means we have unprecedented workforce and talent accessibility. It is certainly no revelation that the AEC industry has felt constricted by a tight labor force, driving the flexibility of where and how people worked. People and families were moving to where they wanted to live, not where a company drew them. Whether the result was to work remotely for their company or to find a job once they arrived, the labor market made it easy for workers to have great mobility. We saw areas of the country become magnets due to quality of life, cost, and job markets.

After COVID, this has been accelerated, but in different ways. Many – like myself – found themselves unable to focus in a small apartment in a dense city and retreated (temporarily, in my case) to the suburbs as the walls crept in. Lack of space and mobility in dense cities have also resulted in cross-country moves to be closer to family, within driving versus flying distance.

Research indicates that we will see new cities emerge, others that have a forecasted drop in demand for the next few years, and others that will likely come back (think New York, Los Angeles, Boston, and Washington, D.C.).

John Burns Real Estate Consulting identified several “Boom Towns” to watch for high demand and rapid price appreciation, noting that these cities have pro-growth governments and industries that were least effected by COVID). Current “Boom Towns” include Austin, Phoenix, Salt Lake City, and Tampa. Some emerging “Boom Towns” have already started to recover from COVID and have proven successful in attracting educated, younger workers, including Charlotte, Denver, Dallas, Nashville, Portland, and, somewhat surprisingly, parts of Seattle.

Climate risk has also contributed as an influencer to the migration trend, as hurricanes, wildfires, and earthquakes have all increased and affected various areas in the U.S. While predictions vary on how significant of an influencer this will be in the medium term, recent wildfires have already caused migration patterns that are being compared to post-Hurricane Katrina Louisiana and post-Hurricane Sandy New York. This has caused cities to start positioning themselves as attractive havens for what we are seeing referred to as “climate migrants” or “climate refugees,” including less climate-vulnerable metros like Buffalo and Cincinnati, as well as less-populated areas in the interior southern states.

Tying back to M&A, companies would be well-served to rethink the traditional market research process and be cognizant of new thinking regarding geographic priorities and what risks and opportunities may be on the brink of driving major change in ways that were, perhaps, not driving the conversation just a year ago, before so many things have changed in our country.

Jamie Claire Kiser is managing principal and director of advisory services at Zweig Group. Contact her at

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About Zweig Group

Zweig Group, three times on the Inc. 500/5000 list, is the industry leader and premiere authority in AEC firm management and marketing, the go-to source for data and research, and the leading provider of customized learning and training. Zweig Group exists to help AEC firms succeed in a complicated and challenging marketplace through services that include: Mergers & Acquisitions, Strategic Planning, Valuation, Executive Search, Board of Director Services, Ownership Transition, Marketing & Branding, and Business Development Training. The firm has offices in Dallas and Fayetteville, Arkansas.