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As we enter the second month of quarantine the Tucson market starts to feel the effects of the shut down. The market activity feels like it has dropped to around 50% of what it was a few months ago. Retail and office activity may be lower than 50%. Industrial, multifamily and residential home sales are decent but still less than normal.
Why is this? Most retail and office businesses have been deemed as non-essential and have shut down while people still need homes, apartments, and industrial businesses (trades companies, distribution of product, and manufactured goods).
Below are a few predictions for the post Covid market.
1) Non-medical office footprints will shrink. With work from home orders, employees are realizing they can do the vast majority of their work from their home office, save day to day travel time and gas money. This will shift the office market substantially. We've already seen this trend in the residential real estate market but Covid is going to force this trend to grow throughout the entire market.
2) Retail businesses impacted by the retail shift will be forced to adapt quicker than expected. We all know about the impact that distribution companies like Amazon, Doordash, GoPuff and others have had on the retail market but now having retail storefronts shut down is impacting this shift big time. I am already starting to see retail businesses shift into industrial spaces and change their business models from walk by and drive by traffic to production in a warehouse, advertising online, and distributing straight to the consumers doorstep. Pay attention to how restaurants are shifting with takeout, social media advertising and production.
3) Interest rates will continue to decrease. As businesses continue to remain shut down, the market will continue to suffer. One of the ways to combat this effect is to decrease interest rates. Obliviously how long we are shut down for will affect the interest rates.
4) Increased migration from metropolitan cities like New York or Seattle. Viruses aren't going away. Cities that have people stacked on top of each other are the virus hot spots. Expect some type of migration to less condensed cities with warmer climates like Phoenix, Dallas, San Diego and Tucson.
5) Last mile distribution will continue to take off. As we are forced to stay home consumers are starting to us last mile distribution companies more and more. Think Instacart, Doordash, Amazon, and other Ecommerce companies. Once businesses open back up there will be a lot of consumers that found a grocery delivery app like Instacart during the shut down that will continue to use Instacart. why spend a few hours driving to the grocery store and shopping when you can have it all delivered straight to your door for the same price?
6) Businesses that seemed to become saturated will start to thin out. A few years ago breweries and gyms started popping up everywhere. These start up businesses usually don't have the capital or reserves that non start-up businesses do have while they all have the same over head. Combine smaller reserves with shutting down the business and more competition........
For more market updates visit Indsutrialtucson.com
Max Fisher, Industrial Properties Broker