Covid-19 is impacting commercial property in a very significant way. While commercial property consists of land, building materials, and labor spent to construct the structures, what makes commercial property valuable is the economic use of the property by tenants and the rent that they pay to occupy the space. Obviously the virus has not impacted the physical structures, but it has impacted how businesses operate and the consumer demand for the businesses that occupy these properties.

Both property type and geography play a major role in the anticipated impact to property performance and valuation. The winners and losers of the COVID-crisis are starting to emerge across the different property types. Because the impact of the virus is not felt evenly across the country and is impacting certain industries (i.e., retail trade, accommodation and food services, oil & gas) and markets worse than others.

Virus-related deaths

Using the Center for Disease Control’s (CDC) reported cases since January 21, 2020, it is apparent that rates of COVID-19 are concentrated in the Northeastern part of the US, where there are many large and densely populated cities. While the virus is in every state, seven of the top 10 states with the highest rates (cases per 100,000 people) are in the Northeast:

  1. New York (1,800 cases)
  2. New Jersey (1,628 cases)
  3. Massachusetts (1,230 cases)
  4. Rhode Island (1,176 cases)
  5. Connecticut (1,027 cases)
  6. District of Columbia (1,002 cases)
  7. Delaware (780 cases)
  8. Louisiana (733 cases)
  9. Michigan (731 cases)
  10. Illinois (725 cases)

These states are likely to open more slowly than states that have seen fewer cases. Additionally, psychology will play a key role within these states as they do open. Because these Northeastern states’ residents are more likely to have been directly impacted by the virus (e.g., fall ill or know somebody who fell ill), the threat of a second surge in infections will seem much more real than in the states where fewer people were affected. This heightened perception of risk will likely be evident in much more cautious consumer and corporate behavior when the economy does open. Higher levels of self-enforced social distancing, remote working, and isolation will keep the region’s recovery slower than other regions.

While the Northeastern states’ consumers will be encouraged to spend and help the local economy, the psychological burden and new habits formed during the months of quarantining will be the start of a new phenomena – fear of going out (FOGO) – and will dampen the potential economic recovery speed. While business travel may resume to the major cities (e.g., New York, Boston, Washington), leisure travel will likely stay suppressed, as cautious travelers will opt for less affected areas.

Source: Centers for Disease Control and Prevention

At-risk labor force

The COVID crisis was a live fire test of many business contingency plans – forcing many companies to adopt remote work. Those that were able to make this adjustment will likely keep it (to some degree) indefinitely, even in the post-COVID world. However, not all jobs are able to be done remotely. Many of these jobs are retail and hospitality related – such as retail sales, food, beverage, cleaning, beauty/hair, etc. Because these jobs are deemed non-essential and highly exposed to consumer demand, they are at greater risk. The 10 states with the largest percentage of the labor force in these at-risk jobs are:

  1. Nevada (56.0%)
  2. Wyoming (54.8%)
  3. Indiana (52.7%)
  4. North Dakota (51.9%)
  5. South Carolina (51.5%)
  6. Mississippi (51.3%)
  7. South Dakota (51.0%)
  8. Louisiana (50.7%)
  9. Alabama (50.6%)
  10. Kentucky (50.3%)


Many of the states with high concentrations of at-risk jobs are states that rely heavily on tourism (Nevada, Mississippi, Louisiana, South Carolina – Hawaii was 11th), states with large energy production (Wyoming, North Dakota, South Dakota, Louisiana), or manufacturing (Indiana, South Carolina, Alabama, Kentucky) – and about half of these states are in the South. Despite many of these states having lower cases than the Northeastern states, these states might be even more sensitive to a smaller outbreak or a less severe response, given the higher percentage of the labor force being in industries that are more susceptible to being cut.

Source: Bureau of Labor Statistics; Federal Reserve Bank of St. Louis

At-risk industries

Similar to the at-risk labor force discussed above, there are certain industries that are riskier. These riskier industries have been hit harder than other industries during the COVID crisis and include retail, energy, administrative work, hotels, food services, arts, entertainment and recreation. Across the US these industries account for approximately 14% of gross domestic product (GDP), however the top 10 states’ economies have outsized exposures to these hard hit industries (and the percentage of GDP):

  1. Nevada (29%)
  2. Wyoming (28%)
  3. Alaska (25%)
  4. Oklahoma (25%)
  5. New Mexico (22%)
  6. West Virginia (22%)
  7. Texas (20%)
  8. Hawaii (20%)
  9. North Dakota (20%)
  10. Louisiana (18%)


If these industries suffer, the states listed above will suffer more. Firm closures can lead to higher and longer unemployment and decreased tax revenues for the state. Decreased economic activity weakens property valuations.

Source: Bureau of Labor Statistics; Federal Reserve Bank of St. Louis

Value of stimulus

As noted in a recent piece, one of the components of the current crisis is the liquidity crunch that many companies are trying to survive. The government has taken many major steps to try to support businesses and consumers where it can, by providing money to these to keep them afloat. However, a dollar in some states goes farther than a dollar in another state. While some of the government stimulus does account for these differences in purchasing power across states, not all of the stimulus does (i.e., the CAREs Act stimulus checks to consumers). Looking across the regional purchasing power parity of rents, the following states have the highest parity values (regional price parity index value):

  1. Hawaii (156)
  2. District of Columbia (154)
  3. California (150)
  4. Alaska (132)
  5. New York (131)
  6. New Jersey (130)
  7. Maryland (121)
  8. Massachusetts (121)
  9. Colorado (120)
  10. Washington (119)


While the differences can vary greatly within metropolitan statistical areas (MSA) within each state, the state-level price parity is a rough, but helpful gauge to see how different states’ typical rents compare. The higher the rent in these states, the more difficult it is for these property tenants to make their rent payments. Or worded another way, in these states, the same stimulus dollars stimulate less.

Source: Bureau of Economic Analysis

Hardest hit & hardly hit

Using the four metrics discussed above to identify the states that are hardest hit in terms of health risk, labor risk, business/GDP risk, and price parity/stimulus – we’ve ranked the 10 hardest hit states and the 10 least hardest hit states.

Hardest Hit

State Key Contributing Factor(s)
Nevada Labor Risk, Business Risk
Hawaii Price Risk, Business Risk
Wyoming Labor Risk, Business Risk
New York Health Risk, Price Risk
New Jersey Health Risk, Price Risk
Alaska Price Risk, Business Risk
Louisiana Health Risk, Labor Risk, Business Risk
District of Columbia Health Risk, Price Risk
North Dakota Labor Risk, Business Risk
Massachusetts Health Risk, Price Risk


Hardly Hit

State Key Contributing Factor(s)
North Carolina Business, Health, Price
Missouri Price, Health, Business
Ohio Price, Labor
Arkansas Price, Health
Kansas Price, Business
Oregon Health, Business
Georgia Business, Labor, Price
Minnesota Business, Labor
Nebraska Business, Price
Wisconsin Business, Health