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Here in the US we had what I have come to call our Moment of Common Recognition that COVID-19 would directly impact each of us. Prior to that day we had scary news that always seemed far away whether that was in China, Italy, or on a cruise ship docked in Japan. We all saw that there was a new virus but our experience with other novel virus outbreaks such as SARS was that they had always stayed far away from us individually. That narrative broke with a confluence of events throughout the day and into the evening of March 11th. The Trump administration announced a travel ban for 26 European countries in the morning and those of us planning to travel abroad immediately had to start rethinking those plans. Then in the evening it was announced that Tom Hanks and Rita Wilson had tested positive and were under quarantine in Australia. Shortly thereafter the NBA abruptly pulled their players from the floor of a game between the Oklahoma City Thunder and the Utah Jazz after Jazz player Rudy Gobert tested positive. Until that moment we were either mostly unaware of the virus, hopeful that it would not show up in our hometown, or waiting for a sign of when we too would be forced to begin distancing as had happened in China and Italy. But after the events of the evening of March 11th, we were all aware that the impacts of the virus were not small and that they were now upon us.

 

I will always vividly remember sitting on the couch watching the last live sports event I have seen still at the time of this writing as my CU Buffs basketball team played in front of a sparse crowd in the first round of the Pac-12 basketball tournament in Las Vegas. As we watched the headlines roll in below the game on the ESPN feed we started talking about activating the plans we had put in place over the prior weeks to take the Destiny Capital team remote and for my wife to start delivering her lessons to her third graders without them in the classroom. There are moments that stand out for each of us around this event but I will always remember this one on the same level as I will always remember vividly where I was when I learned about the 9/11 attacks. 

 

There is no doubt that this event has been challenging at many times, traumatic in others, and tragic for those who have lost loved ones. We will all remember this and how we adapted to the new normal of life with a global pandemic. 

 

As we are now 60 days into our new world after this Moment of Common Recognition we wanted to highlight some of the ways our world has changed and which of those are likely to be permanent. 

 

Short Term – Likely Not Permanent

Dining out, shopping, sporting events, travel, and tourism

Any of the following will allow for a return to these activities:

  1. Good data that demonstrates that this virus is more infectious but less problematic than originally feared, meaning more people get infected but fewer become critically ill. We need significant increases in testing and analysis to see if this is in fact true.
  2. Viable therapies that improve outcomes for the very ill.
  3. A vaccine that is widely available and effective against all or seasonally present strains of COVID-19.

We are social creatures who value connection and interactive ways to use our discretionary dollars. The return to these activities will likely be slow and the next few years may be very rocky for businesses in these spaces but we will be back here over time.

 

Short Term – Likely Permanent

Remote work, flexible work locations, increased virtual learning in education

I am sitting in my basement guest bedroom at a spare desk as I write this. I have a broadband connection, laptop, large external monitor, and a webcam in front of me and while I miss seeing the rest of our team and our clients day to day I am able to accomplish everything I need for the work we do at Destiny Capital. I fully understand that you cannot assemble an engine block from your basement or perform orthopedic surgery but for a number of businesses in technology and services the tools are now so well integrated that there is no need to be in a physical office every day. The costs of commuting, living in high cost metropolitan areas, and in lost worker productivity due to having to fit into the mold of a standard work day are very real and the benefits of increased flexibility are significant. We see a permanent shift in some businesses, including education, utilizing a more robust technology platform to enable fully remote or partially remote work for their employees as a permanent change due to forced distancing during COVID-19.

 

Long Term – Likely Not Permanent

Cruise lines, theme parks, fitness facilities

Each of these businesses have been drastically impacted by distancing requirements from COVID-19 and each is also likely to come back more slowly than others. However, the demand for travel and experiences for families and mass-market travelers should continue to be robust in the long term and the social elements of fitness facilities should win customers back over time.

 

Long Term – Likely Permanent

Commercial real estate structures, current growth rates for top metro areas

The shift from physically commercial space to e-commerce has been accelerated significantly by COVID-19 and will likely remain durable after this has all passed. Consumer adoption of these commerce platforms from Amazon to Grubhub to Zoom has been significant over the past 60 days and many of those new customers are likely to retain the services going forward. We also feel that the use of commercial real estate in not just retail but also traditional offices could be significantly impacted due to either reduced demand for space as companies shift employees to remote work or due to less favorable terms to landlords as companies seek increased flexibility in their lease agreements. We could also see impacts across real estate classes should remote workers become a significant share of the workforce and choose to live outside major metro areas. There is a great deal of unknown across real estate and we will likely see changes in business and consumer preference play out over years to come.

 

What we know for sure is that COVID-19 has impacted the world around us and will continue to do so for the near future. We can all continue to work together to stay flexible and find the opportunities as they present themselves. We are here for you and look forward to navigating the unknown together.