As many enjoy their families and homeschooling…ha ha, we can turn to other matters to help mitigate any impact to our financial well-being due to this economy. As you know from working with our office, we take a strong stance on supporting data for anything we handle in real estate and also in establishing an opinion. The following are links, data, and opinions to hopefully help understand the local commercial real estate market during the COVID-19 times.
Our country has never had such an abrupt slowdown in the economy. There has never been a time in history that we could look back on and determine the outcome of what is currently playing out in our nation. Locally there are businesses more impacted than others. Our office has had one escrow cancel due to the confidence in the market; however, all other escrows are continuing with continued confidence. Buyers and Sellers are anticipating a possible short-term slow down and all have strong confidence in an anticipated quick market recovery. Many believe this will continue to increase pent up demand and the market will come back roaring better than before. It is definitely too early to tell, but we will continue to monitor the discussions with local businesses and collect supporting data.
From viewing traffic and activity in the Redding area it appears there is a slight slowdown, but not as much of an expected halt to business. We are concerned with the abrupt stop of commerce in the market for many industries. Shasta County has 22.1% of employees in the retail sector with 6.5% in the restaurant industry. These employees will be heavily impacted, which will affect payment of rents for multi-family and qualifications for home loans. However, restaurants are adapting and a local restaurant that is now serving take-out when asked about revenue said with take-out they are at the same figures as dine-in, but with less labor costs.
Shasta County employees in the services industry equals 44% another sector that will be hard hit. This means that over 66% (retail and service) of the employees in Shasta County could be heavily impacted by this shut down and this will then spread to other sectors of the economy. Although of the 44%, the medical and health services is 13.6%, which are continuing to work and most likely generating overtime pay. We can’t thank the healthcare workers enough during these challenging times.
Our office has experienced the first call from a fitness studio about how to reduce or delay rental payments. In addition, landlords are interested in possible deferment of loan payments if tenants stop paying rent. We are happy to discuss any options and provide feedback with all parties; please use our office as a resource. Here is a recent article on the Certified Commercial Investment Member (“CCIM”) website; Tenant and Landlord Guidance for COVID-19 Just yesterday we saw Sacramento make a move to expand the eviction moratorium to commercial property; article in the Sacramento Business Journal: Commercial Eviction Moratorium in Sacramento We have not heard any rumblings of this at the State or Local level, but will continue to monitor this for our clients.
Overall, individuals’ priorities have changed to survival, which is completely understandable, and purchase or leasing of commercial real estate has taken a temporary backseat. Brokers in larger areas that were impacted earlier with the “Shelter in Place” state they had an immediate pull back on any activity and many buyers/tenants are now waiting to see how this all plays out. Unfortunately, we aren’t able to show properties, although with technology we continue to generate interest and can still provide the information over a Zoom meeting to inform a potential buyer/tenant. Investment property seems to have a stronger market than other sectors, which could most likely be from the massive loss of wealth in the stock market. We definitely do not have a crystal ball, but based on information on the virus anticipate hopefully approximately three months of a slow-down in activity. Here are some videos we found helpful on COVID-19 and from these videos we are continuing to monitor the growth factor for the United States and California in order to forecast the timing for recovery.
Thank you for your continued consideration of our firm as your commercial real estate resource and please stay safe.