It has been a long year!!!!! I took on “newsletter duty” last March and April during Covid while we all tried to navigate our way through the potential end of the world and humanity as we know it. This earned me a long reprieve from it being my turn to write one, but alas, here I am again on a Friday morning scouring my smaller than average brain on what to write. I find it strange that I am writing about how “last year” was as if this were New Year's Eve or the end of a fiscal year, but it isn’t. It seems now everyone measures their “year” from when Covid began, as if March 5th, or whatever date it was, is when our year ended, and a new one began. So, let’s look at “last year” and see if we can use it as an indicator as to where our business is going. Warning, take none of this as gospel as I am usually wrong in all of my predictions of what I think is coming.
We have been busy, as have many in the construction industry. Clearly housing is off the charts, with houses being on the market just a few days and literally receiving dozens of offers, all well above ask. Ultra high demand coupled with ultra low-interest rates has proven to be enough horsepower to overcome skyrocketing lumber and drywall prices as well as nearly every other raw material used in construction. Heck, even the astronomical cost of civil engineering isn’t a drag on this housing market, or so some of my clients tell me. From my perspective, the suburbs are booming, and the cities are struggling. With the city nightlife shut down for the most part, crime on a steady upswing and it being difficult to social distance, we have seen a steady migration out of the urban areas to the suburbs. This may not make all of the Municipalities happy, but the phone ringing in our office is a welcome sound. And so, prediction #1, I feel housing will remain strong for at least several years while this demand continues to be met but may slow as interest rates and gas prices begin their slow creep upward. Someone has to start paying back all of this stimulus money and if you think it won’t be you, think again. Repayment comes in many forms, my friends. However, it is important to keep in mind that the home is no longer just the home; it is also the office, the school, the gym and the vacation spot (as we have engineered more swimming pools this year than we have in the last 20 years combined). And households have shifted those dollars spent on many of those things and put them in the “new house” bucket. This is a good thing….for us.
The office market… where do I begin. Our firm has all been in the office since May 1, when our Governor deemed us “essential”. Thanks Tom. However, we seem to be part of a very small club. Nearly every Zoom meeting I do, and I hate Zoom, has the other people in their kitchen or 4th bedroom office. Most of the people I deal with are still at home. I hope that changes soon, but rarely do I not have someone in a meeting lean forward, look over both their shoulders and whisper, “Denny, I get more work done at home than I do in the office”. Just know that while I would never do it, in my mind, I am leaning forward and slapping you and saying, “ Bull$*#T you are!!!”. So what will become of all of this office space? I don’t think anyone knows, but I hope that many eventually go back or space gets leased by businesses moving out of the urban areas. Either way, I would not be building an office anytime soon and phone calls to design a new office building are few and far between, if at all. So, prediction #2, the office market may be in for a change. Maybe new HVAC systems or “healthy” work areas will be the new norm, but it is anyone’s guess. My gut says people need to be in an office to hire new employees and people from college but who knows. Somehow Drexel and University of Delaware get $80,000 of my co-signed student loan dollars a year to show my kids videos online while they sit in a cinder block cell with a mask on, so maybe the same will hold true for business in the future.
The retail market… oh boy. I mean, when you can order whatever you want and have it that day or the next day at the most competitive price, what is the point in driving somewhere to buy something unless you need to try it on? I will let the pros figure this one out. What will be interesting is how PA Municipalities will react to this as it pertains to their retail and commercial zoning. Prediction # 3, we will continue to see a huge effort into large-scale Amazon and Target type facilities and significant infrastructure dollars will be spent to facilitate moving all of this merchandise around and into our hands. Of course, this brings jobs, and those people need a place to live so… refer two paragraphs up. To the rest of my retail buddies… I would hold on for some bumps as the world changes.
Lastly, let's look at the flex/warehouse market. I see this being good for a long time coming. Many businesses that require office AND warehouse simply need to be physically at work. You can’t take tractor trailer deliveries, move merchandise and assemble things on your laptop in your underwear at the kitchen table. With all of the housing from above, the trades, landscapers, pool installers etc need a place to work and to service and take care of all of these new homes. Let's face it, more and more new homeowners can’t fix a leaky faucet or mow their own lawn. Prediction # 4… I like flex!
So how has the last year been, STRICTLY from a business perspective? My answer would be different but good. Covid has taught us all some very tough lessons, but those lessons are only valuable if we learn from them. And as we learn from them and continue to pivot to meet the changes in demand, it certainly is pointing to a much brighter future than what many of us thought we were looking at this time “last year.” Many know I eat breakfast nearly every day at Market Street Grill in West Chester, and this morning, for the first time in a year, I had to lean across the table to hear what my friends were saying because of the noise of everyone talking in the restaurant. What a wonderful inconvenience to have! Stay safe and healthy, and see you “next year” in March 2022.