As Coronavirus (Covid-19) impacts Seattle more and more, what kind of changes it will bring to the region and city that has seen it become the 3rd fastest growing city in the country. Seattle’s relationship with growth has always been ambivalent. Will attitudes about growth and new development change if the local economy takes a hit? Like it or not, the spread of the virus and Seattle’s status as a hot spot, will have many economic impacts along with the real suffering of people who become ill. Here’s a quick scan of what we know so far.

Tourism

Throughout the world, cities and industries that rely on tourism are experiencing hardship right now. As King County is currently the most affected area in the U.S., tourism and accommodation industries have taken a big hit. Just yesterday, President Trump’s Chief Economic Advisor, Larry Kudlow, advised against visiting Seattle for the time being. Due to the growing concern over the spread of the virus in Seattle, tourism has seen a hefty drop, consequentially impacting hotels and accommodation services, airlines, sporting venue use (the Mariners may play their home games without spectators), the use of conference centers, and many small local businesses. Although Governor Inslee does not agree with Kudlow on the topic of visiting Seattle, the city has already experienced unfavorable economic impacts due to lessened travel.

Retail

Restaurants, grocery stores, malls, and local businesses have been experiencing far less business in the past week than they are used to. With many people staying in, we can observe an increase in e-commerce, as more people have become keen on ordering their groceries online, and staying in from social gatherings. Although physical retail sales have seen a decline, e-commerce is on an even faster rise than before. And this may not change after Coronavirus passes. People who were previously hesitant to purchase groceries or other needs online, may become adapted to it through this experience. Retail centers that are anchored by grocers may be permanently impacted by this change, and see less traffic overall in the future. Mayor Jenny Durkan recently announced that she is working with Vice President Pence to help provide financial support to local businesses in Seattle that are experiencing hardship with the lessened traffic and sales. However that temporary aid will not provide long-term relief to the potential permanent loss in business.

Warehousing

About warehousing, Dr. Norman Miller, Hahn Chair of Real Estate Finance at the University of San Diego says, “After hotels, the next most impacted property type will be bulk port warehouses that deal with imports of construction materials and car parts and electronics, while local warehouses servicing the last mile will benefit from a surge in e-commerce as people shop more online and less in person, to the extent that inventories are produced locally.” Warehouses supported by e-commerce will thrive, but those which provide goods to physical retail stores, or the construction center, will see a downfall.

Office

Memos sent from the Seattle offices of Amazon, Microsoft, Google, and Facebook, along with other large corporations, have entailed instructions for employees to telecommute instead of coming into the office. This is being done to help mitigate the spread of coronavirus, as some of the companies have employees who have contracted the virus. In the past, there has been an increase of demand for telecommunication in the office market, with many millennial employees expecting it as a guaranteed feature to their daily work lives. Although some companies have been resistant to offering guaranteed work-from-home time, the increased telecommunication due to coronavirus will test the concept throughout numerous departments in these companies, and may become a more permanent trend if everything works fluidly. A direct impact of increased telecommunication on CRE is reduced square footage per employee. Employees need less dedicated space when they consistently work from home, resulting in lessened square footage in office space leases.

Residential

The residential market will see an array of different impacts from the coronavirus outbreak. With low interest rates, refinancing is bound to increase, and investors will subsequently create a rise in new purchases. However, with unemployment uncertainty, the single-family home-purchasing market will start to slow, as people become more conservative with their spending and aspirations. Although a recession is unlikely, a lower GDP and higher unemployment rate going into the spring will trigger consumer uncertainty and subsequent economic reactions.

The commercial real estate sectors that are seeing the negative consequences of a viral outbreak and consumer response, are by far retail and warehousing. Some of the impacts will shift back to normal once the viral spread slows, but others may linger for years to come.

Layla Khademi is a Master of Science in Real Estate candidate at the University of San Diego School of Business. She received her bachelor’s in business administration, marketing, and finance from Seattle University in 2019. She has blogged for Reed MIDEM’s MIPIM conference, as well as the University of San Diego Burnham-Moores Center for Real Estate. Layla has worked in real estate for the last six years, having roles at both the Seattle University Board of Trustees facilities and technology committee, and at Starbucks’ real estate department. She currently works in multifamily investment and property management in Seattle.