Our parents, grandparents, great-grandparents… back through the Civil War, colonial times, Middle Ages, Dark Ages …every generation faced at least one awful thing. Now it’s our turn.
We all hate COVID-19 and none of us signed up for a recession. Every premature death is a tragedy. You may have lost a loved one. You, or someone you love, may be among the millions who have lost their jobs or businesses. Many of us adjusted to wearing masks, social distancing, and working from home.
Whether your information comes from social media, TV, movies, grandparents, or history books, you know that war, death, economic, medical, political, and social disruptions have affected every continent in every century. Life in general is persistent; our individual lives are vulnerable.
The virus has changed reality. Some of that reality is more obvious to you than to me and vice versa. None of us knows when or if we’ll have a vaccine or a cure. We hope that rioting will dissipate and that our safety is not threatened.
Tipping points are transitions that are irreversible. In avalanche studies that point is called “the angle of repose.” The next bit of snow or wind brings the avalanche. The virus has changed our lives and our economy. What is the new normal? The people who recognize that early will avoid harm and may even gain.
I studied what I could find and pondered this a lot. I deliberately engaged deeply with some smart people whose perceptions are much different from mine. I want to understand their perceptions and why they hold their opinions They may be wrong in different ways. Wisdom involves stopping what no longer works and doing more of what is now appropriate. Here’s what I think lies just ahead.
Every life and every business can tolerate some stress, but there is a point at which each human life and any businesses will disappear. Most publicly traded businesses have less than 5% profit margin. When the income drops 20% most businesses will fail. Small businesses are even more vulnerable. Most small businesses had less than 28 days of cash available before the pandemic forced them to close for weeks.
For a generation or more, the world and America chose density. We moved from small towns and open spaces to cities.
That has changed. Recently Amazon, Apple, Facebook, Google, Microsoft, and their ilk freed their people from the campus and towers. Thousands of tech wizards are going to Boise and forty other places with less traffic, lower priced housing, and more space. Millions will work virtually, some far from a central office. So, here are my guesses for what will happen to employment.
Grocery stores, hospitals, and military will have the same employment as 2019.
Most service and office jobs, government, and worship center work not mentioned below, will have about 98% of 2019 employment. Brick and mortar retail not mentioned below may have 97% of 2019 employment.
Airlines, car rentals, bars, restaurants, hotels, and motels will return to 80% of 2019 employment.
Ballroom dance studios, gyms, folks who provide facials and pedicures, and people who serve residential university students may have 75% of 2019 employment.
Jobs that might be at 60% of 2019 levels include concerts, movie theaters, live theater, opera, and stadium sporting events.
My craft is investment brokerage. What about income property. especially in San Diego?
Millennial housing in central business districts, downtown, Little Italy, and newer North Park buildings may see rents slip 10%. These values may only drop by 10% because investors love relative glamor.
For the other 97% of San Diego County apartments rents may be about 2019 levels and values about 95% of 2019. San Diego County’s rental housing shortage won’t be erased by a few renter deaths and a larger number who moved home or left San Diego County.
Nationally retail rents could drop 10% and values might drop 15% -20%. Nationally, I expect office will suffer more. Americans will tolerate zoom meetings to save gas and time. Health and home appointments are easier without the need to co-ordinate with the boss or the team.
It could take a decade to repurpose excess commercial space into residential. Hotels, motels, assisted living, and nursing homes are obvious candidates for adaptive reuse.
Many of my guesses, and yours, will be wrong. Yet, life has no pause button. Avoid drift. Drifting takes you somewhere you don’t choose. Use your best information and the wisest thinking to keep moving forward.
What are your guesses about the future?
How are you acting on those guesses? Please enlighten me. We both need to make great choices.
Terry Moore, CCIM, is the author of Building Legacy Wealth: How to Build Wealth and Live a Life Worth Imitating. Read his “Welcome to My Blog.”