Northern Virginia housing market ‘resilient,’ commercial real estate uncertain, economists say | Headlines
The residential real estate market in Northern Virginia remains “resilient” after a year of economic turmoil, according to economists. However, the demand for commercial real estate in the region is still uncertain.
During the nationwide rollout of the COVID-19 vaccine, local economists and industry executives in Northern Virginia gathered for a virtual version of the Northern Virginia Chamber of Commerce’s annual regional economic outlook on Thursday.
The aim of the discussion was to educate community business leaders about the prominent economic trends over the past year and the factors affecting Northern Virginia’s economic recovery. In particular, panellists drew attention to the property market in the area to indicate that the economy appears to be holding up well, but stressed that it is difficult to know what to expect in the future.
“We don’t believe that when we’re back to normal – when all of the vaccines have been given … we will be looking at the same economy,” said panelist Luke Tilley, chief economist at Wilmington Trust.
Tilley said one possible outcome of the recession caused by the COVID-19 pandemic could be companies becoming more reliant on new technology, consolidating assets and hiring fewer employees. When companies make these kinds of changes, it could be both negative and positive for the national and regional economies in the long run, Tilley noted.
“And that has both positive effects on individual company productivity and negative effects on jobs, at least in the short term – not for all – but it does mean that some jobs are outdated,” he added.
If these trends become a reality, Tilley notes that it may have an impact on whether workers will return to their offices in the future.
None of the panellists said they believe office space will be outdated or that teleworking will become the new norm. In fact, Bill Collins, vice chairman of the commercial real estate company Cushman & Wakefield, said that “office collections are still very hot right now.”
Collins noted that workers in general want to get back to work in person, especially younger generations, including millennials. Citing a survey published by his company, Collins said 78% of respondents said they really need to be in the office at least three days a week.
According to Collins, many international and domestic companies are looking for long-term office rentals in urban and suburban areas across the Washington area. Collins added that “the market should return in six or seven years.”
Lisa Sturtevant, chief economist at Virginia Realtors, said the other good news is that the residential real estate market has seen significant growth since the beginning of the COVID-19 pandemic.
“Our most recent memory of a recession was the 2008 recession, when the real estate market was just devastated,” said Sturtevant. “So there have been a lot of concerns that the property market may be affected. But the real estate market has been remarkably resilient from the coronavirus pandemic and has led the economic recovery at both national and state levels. “
The greater shift from urban to suburban and even rural areas in Northern Virginia is due in part to COVID-19. Still, Sturtevant noted that this was also due to the lack of affordable living in the Washington area.
“I think we’re not talking enough about the benefits of housing supply or … the cost of not having enough housing for the workforce,” Sturtevant said. “I’m not talking about the impact of building a new house. I am talking about the economic cost of workers leaving the market because they cannot find housing. “
In the long run, Sturtevant said that even if people preferred to live closer to where they work, the high cost of living could make remote working more practical if they had to live further away.
“There’s a lot of back and forth about who is following whom,” said Sturtevant. “Do companies follow workers or do workers follow companies? And that kind of depends on the industry. “
Sturtevant said the solution to this problem is to build more homes to keep up with long-term demand.
“As working families make decisions about where to move and understand why people stay in an area, this is the quality of life we have here in Northern Virginia. It’s a great place [and has] great schools in our region, ”she added. “But if you can’t buy a home, you’re going to be looking at places in Memphis, Charlotte, and Atlanta that will also attract tech companies.”