The Evolving Regional Landscape

The Evolving Regional Landscape 14 Apr 2020

COVID-19 Impacts on Real Estate

These are unprecedented times, as the impacts of COVID-19 continue to evolve at a rapid pace. Our Metro DC Avison Young team is committed to you and remain available for discussions and advice as your partners. We hope you find these latest insights, our sixth analysis in this series, valuable.

Coronavirus Infections Reach Nearly 17,000

As of April 13, the number of COVID-19 cases reported across the District, Maryland and Virginia has reached nearly 17,000. The number of new cases per week continues to increase, but the rate of growth has slowed as measures to contain the virus have grown and are being more widely followed. Regionally, the cumulative number of cases was increasing sevenfold week-over-week as of March 16. As of April 13, the number of cases is doubling each week. In the below note, these increases in cases have resulted in both increasing and decreasing activity levels altering our regional landscape.

Metro Ridership ↓ 88%

Mandated business closures, stay-at-home orders and a cutback in train schedules caused daily system-wide Metro ridership to drop by 88% year-over-year as of March 22, according to preliminary data from WMATA. Notably, areas seeing the smallest declines in Metro ridership are also the ones with the highest incidence of COVID-19 cases. Maryland has reported more cases than the District and Virginia combined, and Prince George’s County, where Metro ridership has strayed the least from 2019 levels, is the most affected county in the state with more than 2,000 confirmed cases. In this visual below, the red and orange shades indicate where ridership has dropped most year-over-year, whereas the blue and tan colors reflect stations that have seen a drop, but not as notably, signaling that people are still utilizing these Metro stations for transit, going against the advice of stay-in-place orders.

Internet Use ↑ 25-115%

While prohibited from traveling physically, regional residents are staying in contact virtually. Virtual meeting service provider Zoom reported an increase from 10 million daily users pre-crisis to more than 200 million in March and April timeframes. Statistics released by Verizon (pictured below) show dramatic increases in internet use since before the pandemic struck.

This increase in internet usage has unique implications for Northern Virginia. Home to the world’s premier data center market, through which 70% of the world’s web traffic passes, Northern Virginia – and particularly Loudoun County – should see an uptick in data center activity in a time when most sectors of the economy are on the decline from a physical sense, instead going virtual. Some of the activities, post-crisis, will also likely remain more virtual than physical, benefitting demand within this market segment. While most office tenants are hitting pause on new deals, data center users remain in expansion mode. Further, while office owners are seeing reduced trading activity and depressed pricing, data centers and the land on which data centers are developed will continue to experience robust velocity and little downward trajectory in value.

Unemployment Claims Continue to Skyrocket ↑ 106%

Last week we reported that over 103,000 initial unemployment claims were made the week of March 21. That figure doubled week-over-week, to 213,683 claims in the week of March 28. The claims from these two weeks alone imply a nearly 400-basis-point increase in unemployment across the three jurisdictions.

Regional Jurisdictions Face Budget Troubles

Regional governments find themselves strapped for resources, as the need for significant virus-related outlays coincides with a significant drop in revenues from taxes on income, property, sales, hotel stays, and other sources. Maryland Governor Larry Hogan reported that his state is projected to lose more than $2 billion in tax revenue over the next few months and has been forced to stop all spending not related to the health crisis. Mayor Muriel Bowser of the District of Columbia reported that lost revenues will force the city to cut its budget by an estimated $609 million, representing 6.5% of the current budget and returning it to near 2017 levels. Although the CARES Act set aside $150 billion to aid state and local governments in combating the coronavirus, restrictions on how those funds can be used mean that local jurisdictions will still have to slash other types of spending, potentially harming the region’s infrastructure projects, police presence, school systems, parklands, and myriad other items.

 

For more on the virus’ potential #CRE impacts, read the latest briefings on our
Avison Young Resource Center

The spread of COVID-19 and the containment policies being introduced are changing rapidly, and some of the views expressed herein may not reflect the latest opinion of Avison Young. These sources provide regularly updated information on the COVID-19 outbreak: World Health Organization, Government of Canada, U.S. Centers for Disease Control and Prevention, UK Government, Johns Hopkins University COVID-19 Case Tracker.