31 Aug Employment Market Will Dictate SoCal Recovery
Employment rates will dictate the economic recovery in Southern California. Already, the job losses have impacted occupancy and rents in commercial real estate, and it could take until 2022 to see full recovery of the jobs that were lost during the pandemic. However, there is already pent-up demand that will help to fuel the growth.
“The jobs market is really what is going to drive the economy, and Southern California is no different than most of the jobs markets. We have seen rents decrease across the board—although industrial is holding up fairly well—but the pace of economic activity is starting to revive, especially as we head into the later part of the summer,” Hamid Hussain, president of real estate and commercial banking at Banc of California, tells GlobeSt.com. “We are seeing that the bottom did fall out, but there is a bottom. There is some foundation there and people are getting back into the economy and spending money.”
The pent-up demand has already helped to rebound economic activity in recent months. This includes both investment and consumer pent-up demand. “There is significant pent-up demand, and that is going to be interesting to watch as we come out of this. I am optimistic that we will find a vaccine, and the economy will come back in full form,” says Hussain. “It will be interesting to see the pent-up demand that will return early next year and next summer. People have spending power and they want to get out and spend money in the economy. I think there is significant demand, and I am very optimistic about the recovery.”
However, the employment problem offsets the pent-up demand and could ultimately prolong the downturn. “The offset of that is the unemployment picture. You have a significant amount of people that are laid off and looking for work,” says Hussain. “Unemployment is running at 13%. It is going to take a significant amount of time to get back to pre-pandemic levels. We don’t think it is going to happen over night, even with a vaccine. Employers are going to be cautious in building back up. It could take into 2022 before we get back to pre-pandemic levels of unemployment.”
Ultimately, however, Hussain expects a full recovery, and he doesn’t anticipate any long-term changes. “Some people think that there will be an exodus of workers or people, but I think that is premature,” says Hussain. “I don’t think that is going to happen. Obviously, we are seeing some of it, but I don’t think that it is at the levels where cities are going to be gutted. Southern California is still going to be a great place to live. I don’t think that we are going to see a mass exodus out of cities.”