by Matt Durkee, NBT Bank President of New England The commercial real estate market was hit hard by the economic impact of the COVID-19 pandemic. And no one knows how long the impact will last.
In Vermont, our commercial customers and the communities we serve have each experienced the economic impact in various ways, but there are certainly a few areas that will have a more difficult road to recovery. Anything that touches tourism—from hotels to restaurants to retail—has been hit hard. In New England—particularly in Maine, New Hampshire, and Vermont—the closure of the border with Canada had a profound impact on the summer tourism season, and is likely to continue into the autumn.
On the other hand, multifamily housing has continued with significant demand, and the demand for single-family homes remains strong, reflecting the extended effects of a long-term affordable housing shortage that exists in this region.
Retail locations, anchored by grocery stores are also doing well, as the pandemic has altered the food shopping habits of many.
These mixed impacts extend to many different types of business properties. Much has been written about the dramatic shift to working from home and the potential for a permanent drop in demand for office space. In New England, we are seeing employers approach a return to work from a different angle. In offices that prefer or require an in-person presence, employers are reconfiguring their work environments to accommodate the need for physical distancing. This has resulted in some clients actually needing more commercial space to address pandemic-related office changes. Bearing in mind that some businesses, such as lawyers, accountants, and banks, will always need Class A business space, local commercial bankers are able to help support these businesses that show strength.
There is no “one size fits all” in the commercial market, though. While it has always been the case that each business has its own unique set of needs and challenges, it’s now more important than ever for your banker to listen closely to what is needed and for business owners to communicate as much as possible. These new patterns are likely to be with us for a while, which is something that many organizations are now beginning to adjust their business plans to reflect.
Even at the height of the shutdown stage of the pandemic, banks, including NBT Bank, remained open. While it might have required an appointment to come in and see us, that availability and consistency was important to maintain with all of our customers. Outreach to customers—letting them know that we were available—was and remains key to both reassuring them that we are here to meet their banking needs, and that we will work with them if they need help.
The reopening rollout timing meant that some businesses are just now coming back online, and the commercial market is faced with yet another challenge: consumer comfort.
We’re now asking questions such as: restaurants have reopened—are diners comfortable eating inside, or will they continue to prefer eating outdoors? This will only be an option for a limited time here in New England. Other commercial venues, such as retail stores and gyms, need to learn what their customers will be comfortable with as well.
The New England region also has an aging population who represent a higher risk than younger people, which might mean a slower and more gradual return to more normal levels of consumer activity. And while Congress has passed several rounds of stimulus, a third round has not yet passed and we don’t know how the halting of individual unemployment payments will affect the economy.
Businesses, particularly commercial real estate, must be selective and smart about recovery planning. We know that businesses will need to take time to build back up reserves. It’s not a matter of just flipping a switch; it will take strategy and patience to rebuild cash flow.
Banks want to hear from and work with their customers—they are already invested in them and in their businesses. Open communication allows bankers to make recommendations on any new opportunities or changes that could benefit the business as this situation evolves. This could include lending needs, restructuring, or newly available resources—getting out in front of a problem before it becomes irreparable.
We may not know how long it will take for each area of local businesses to recover, but one of the best decisions that business owners can make right now is to be talking with your banker.
Matt Durkee is Executive Vice President and President of New England at NBT Bank. Durkee led NBT’s expansion into Vermont more than a decade ago. Based in Burlington, VT, he also oversees NBT Bank operations in Massachusetts, New Hampshire, Maine and Connecticut.