We've never been here before, but that's nothing new
3 MIN. READ
SCI's leadership has been sharing their thoughts and observations regarding the impact of the COVID-19 crisis on commercial real estate.
In this installment, EVP & Senior Managing Director Tom Williams reflects on the current situation and other critical points in our recent economic history.
During Ford Motor Company's Q1 2020 earnings call this past April the company's President & CEO Jim Hackett spoke a phrase that could have come from the lips of any executive in any industry at the outset of the COVID-19 crisis: "I never had a business plan that was called 'pandemic.'"[i] While many expected that 2020 would see the end of the record-setting expansion that began in 2009, very few – if any – predicted that the global economy would be intentionally brought to a hard and abrupt stop in an effort to slow the spread of an infectious disease. We are clearly in uncharted waters ... but we've been in uncharted waters before.
In the past 20 years, we've had three once-in-a-lifetime economic crises: the 9/11 Recession; the Great Recession, and the current downturn, commonly referred to as the "Great Pause." Though other generations have witnessed catastrophic market collapses and global pandemics, each of these recent recessions was precipitated by circumstances that most of us have never before experienced. Each of these events is so different in its causes and effects that the learning experiences of one might not seem applicable to the others, but they can help us develop one of life's most valuable tools: resilience.
Which brings us to the cookie jar, a concept I first encountered in the book Can’t Hurt Me by former Navy SEAL, record-setting endurance athlete, and motivational speaker David Goggins.[ii] Goggins' cookie jar is a metaphor for a psychological bank of strength and achievement filled with an assortment of previous accomplishments, former challenges, mental tests, and proud moments. During difficult times (be they endurance races or economic crises caused by global pandemics), we can reach into that cookie jar and recall our history of overcoming adversity. Those memories, Goggins suggests, form the core of the resilience that gets us through the tough moments in life.
This is the third cataclysmic economic event during the careers of much of the commercial real estate industry's executive leadership. Collectively speaking, that's a lot of cookies and a very big cookie jar. Let me be clear about the obvious: this won't be enough to preserve every job, keep the doors open at every company, or even sustain every sector – but the toughness developed in those previous times of adversity will see the industry through this one.
There have been many articles and thought-pieces lately about what we can expect as a result of the current downturn. Some of the broader predictions aren't particularly insightful or useful ("values will drop and then rise again"), and many of the more specific forecasts seem premature. It's now September, and despite the entire country having months of partial reopening and "getting back to normal," it's obvious that we won't find the bottom until the virus reaches its peak and we won't know how this recession will transform the real estate industry until that happens. All we know with absolute certainty is that the industry will be irrevocably altered, and some of those changes will be major.
My company's business plan is pretty simple: we're focused on keeping our staff safe, continuing to deliver the level of service our clients expect, and adapting to whatever changes enable us to do the first two things better. While we always pay close attention to industry trends, we're not obsessing over what will happen next. Our clients are some of the smartest and most innovative people in the real estate industry, and we'll leave the forecasting and strategizing to them. Whatever directions their plans take, we will be there to recruit the talent they need to succeed.