The United States is now more than 10 months into responding to the COVID-19 health care crisis. Minnesota has been grappling with it in earnest since at least March 2020 when Gov. Tim Walz initiated a series of executive orders designed to stem the spread of the disease until testing and/or a vaccine can be implemented. Meanwhile, the effects of the crisis, including the mandates imposed by the governor’s executive orders, have severely affected a broad cross-section of the economy. Some companies, especially service companies, have been able to adapt to the crisis by having their employees work from home. Others, such as health care and construction companies, have been deemed “essential” and thus have been able to keep their employees in place. However, others have either been required to cease operations entirely or severely limit their hours of operation. The net effect of these pressures has been a loss of productivity, jobs and income for companies large and small, and especially those employees suffering through extended layoffs or furloughs. Some of these impacts were mitigated by the combined spending of the federal and state governments, either through direct grants to individual workers and companies, or targeted aid to select industries such as health care or transportation. Now, unfortunately, financial props are ended or soon will be. At the federal level, we have learned that any new COVID relief measure will likely have to wait until after the November elections.
We are a long way from overcoming the health risk created by the COVID-19 virus. Companies and their employees are working hard to regain their footing amidst the ongoing risk and uncertainty but have a long way to go to convince their employees and customers to resume business as usual. As we enter the months leading to winter, outdoor seating options will disappear for bars and restaurants, which will force hard decisions about their operating viability. Companies leasing officing space throughout the state continue to exercise caution which means the vast majority of their employees will continue to work from home for the foreseeable future. Even with enormous federal subsidies (now expired) airlines are facing substantial losses and have announced major staff reductions. The point of this recap is that we are now entering a very tricky and uncertain time, perhaps more consequential than earlier this year. Real estate professionals will be challenged to advise their clients about a way forward.
Anyone who believes they have a crystal ball to divine the future is making it up. The best we can do is confront the situation honestly with our clients, accept that the problem is larger than one company or certainly one individual and focus on what is within our ability to manage. Every economic downturn causes companies to fail and triggers large-scale layoffs; this situation is not due to economic weakness generally so even exercising superb business judgment will not, by itself, see us through. On the other hand, downturns always create new opportunities. It has always been a hallmark of our economy. The marketplace works in mysterious ways but when there is supply and favorable pricing, good things usually happen. In this singularly unique time, let’s hope the good things are not too far off.
Please join moderator Peter Coyle and panelists Tim Elam (Scannell Properties), James Freytag (CBRE), and Gretchen Camp (ESG) this Wednesday, October 28th at 2:20 pm (CDT) for the Bisnow webinar Twin Cities Deep Dive: State of the Market. In Wednesday’s webinar, the panel will discuss the Twin Cities commercial real estate market and offer their predictions about what the future holds and will specifically look into the following questions:
- Could the Twin Cities see a spike in interest as people and companies look to de-densify?
- Industrial is the only asset class to see values go up during this pandemic. What does the future of the sector look like and will it continue to see high demand?
- Much has been made of the office market as most professionals continue to work from home. What does the future of the office market look like?
- Multifamily used to be considered the safest investment in CRE as people will always need a place to live. With so many growing through difficult economic times how can the multifamily start to make a recovery?
- The coronavirus has sped up trends we were already seeing. Which of these trends is going to change the CRE landscape for years to come?
To register for the Bisnow webinar click on the link: Twin Cities Deep Dive: State of the Market