The Seattle area was among the first to see the effects of COVID-19 in the U.S.—and with the Kirkland nursing home making consistent national headlines early-on, the pandemic has publicly shocked our local area.
In the past decade, we have seen remarkable growth throughout the Seattle market, and tourism—including the cruise industry—has become an integral part of our local economy. But now, these newly built local industries are being hit quite hard. Despite this overhanging uncertainty, we remain optimistic about the outlook for our region—particularly, as there are still active buyers and willing sellers in the market.
Short-Term Strength, Future Evolution
Local multifamily, industrial and self-storage properties have still performed well in the early stages of the pandemic. Collections have also remained strong, which we can attribute in large part to unemployment and stimulus payments. We are still seeing opportunities in the multifamily space, and indicators seem to show that transactions will continue to take shape.
On the other hand, the area that will likely feel the effects of COVID-19 most are office buildings, which tracks closely with what we’re seeing in other major cities across the country. With businesses moving to remote working, when possible, companies are reevaluating the space they need for employees. But this could mean that suburban office parks will become a hot commodity—right now, the path is unclear for office properties.
Similarly unclear is how much this crisis will affect investors’ underwriting assumptions going forward, especially if this pandemic is measured in years rather than months. While property and submarket-level demographics have always been important, buyers may begin to adjust their short- or long-term buying criteria or base return requirements on factors such as the percentage of a property’s residents who can work remotely, as an example.
Working Amidst Current Challenges
Obviously, the biggest challenges we all are facing is two-fold in both the public’s health and economic effects of this pandemic. These challenges are really compounded by the additional stressors of remote work. Therefore, we all must understand that the work-life balance is unique to everyone, and can differ individually from day-to-day.
While technological advancements have enabled us to keep business moving where we might otherwise be at a stand-still, the most important thing we can do right now is work to provide our clients with real time information on market trends surrounding their portfolios. We are confident that deals will continue to happen over time, but right now, we want to be sure to advise and support our clients towards thoughtful and sound decisions that will prepare them for what lies ahead.
What Does 2020 Hold?
2020 will be slower than 2019, without a doubt. We have all felt this anticipation in the past few years towards the next downturn, and we now suddenly find ourselves in it. At the same time, we should take solace in knowing that it is less about what happens in 2020, and more about how we react coming out of this period.
Every cycle, past and future, has its own challenges. The wildcard of this one is the global health component. First and foremost, we want people to be safe and healthy. However, we must also be cognizant of the economic perspective.
As of now, we need to keep showing up for our clients and work on advising them to the best of our abilities—so that we come out the other side, stronger together.
-By Ben Johnson, Senior Director and David Sorensen, Senior Director