What's the Latest with the Commercial Real Estate Market
July 29, 2020
Here's the newest edition of our continuing series on What's the Latest with the Commercial Real Estate Market.
To dive deeper into the state of the commercial real estate market and the economy here and abroad, keep on reading. (We have graphs!)
TL;DR - Winter is coming; but when and how cold will it be?
Part I: Working from Home Forever
According to a recent Gallup poll, for those employees who have kept their employment throughout the coronavirus crisis, nearly 7 in 10 are now working remotely all or part of the time.
From the chart above via the Tampa Bay Partnership's Coronavirus Dashboard, a significant portion of the working population in Tampa Bay has shifted to telecommuting as a result of the pandemic. Roughly 40%, on average, as measured across four separate scientific surveys of residents.
Part II: Where Are the Distressed Properties
Commercial real estate is a lagging economic indicator, and it is much like a large ship: little currents don't affect it much, but large waves certainly will. The issue with the coronavirus pandemic is when will the large wave of price decreases and distressed properties come?
From the chart above via Real Capital Analytics, we can see how the number of distressed properties ramped up as the Great Recession of 2008 and 2009 went on. At the same time, prices went down. However, the worst of these effects didn't take shape until almost a year after the start of the decline.
Part III: Cash in the Bank for Small Businesses
In times of decreasing sales and revenues - like we are seeing now during the economic downturn from the fallout of the coronavirus health pandemic - the companies with the most solid cash positions are the ones who have the ability to make it through the most challenging of times.
From the chart above via LendingTree.com, we can see how much cash on hand small businesses have in different metro areas across the country. Nearly 60% of small businesses in Tampa have a supply of cash equal to one month or more of expenses. On the flip side, roughly a quarter of small businesses have less than one month's supply of cash. These two factors put Tampa Bay in a relatively good spot when compared to other metro areas around the country.
Here's to the Fundamentals.