It is now the first week in March and Seattle Commercial Real Estate professionals are getting more and more inquiries about the financial impact of this virus. We warned weeks ago that there would be a material impact, so let’s visit this issue again. We will start with the major employers here in Washington, like Amazon, Facebook, Microsoft, Google, etc., with over 100,000 employees total staying home. The streets are vacant. The airlines have cut trans-Pacific flights by 50% so far, Atlantic flights by 10% and likely to climb, tourism in Seattle and the convention business is materially impacted, but the real dollar value of these impacts are yet to be felt.
For every action, however, there is a reaction. Cruise lines are cancelling cruises in Asia and moving ships and cruises to emphasize Alaska cruises, most of which start in Seattle. The current projection is a minimum loss of 30,000 visitors from China alone. The industry is undoubtedly going to drop rates to attract numbers to cover overhead. The major local businesses whose employees are advised to stay home, are experiencing material drops in productivity anywhere from 20-40%. Restaurants are suffering, but home delivery and drop off food businesses are thriving. Costco is having record sales and people are hunkering down.
In the early part of the 20th century the flu epidemic during World War I in the US killed over 600,000 people. The facts are simple. This disease tends to attack those with some form of compromised respiratory system who are over 60, as evidenced here in the nursing home in Kirkland, Washington. For most victims of the disease, there is sickness and recovery. Medical professionals world-wide are working on an antivirus and there is a certainty that a serum will be discovered.
Let’s summarize the impact on Seattle commercial real estate. For sure anything that affects the economy world-wide, in the US and thus locally will be felt. Our professionals for quite some time have felt that when things are so good that no one can make a mistake in commercial real estate that it is a prescription for disaster. There is plenty of room for our real estate economy to accommodate a slowing. Those who are “betting on the come” are in danger. That means that there will be opportunities for those who were gambling. The facts are simply that the underlying strength of our economy is based on jobs. Jobs demand is still growing and you can’t continue to have people work from home. The secret sauce for the clients of Seattle Commercial Real Estate is to have equity in your projects and to have cash and lines of credit to ensure your ability to not only survive, but prosper. This too, shall pass.