Marin Economic Forum Blog Post

As we enter 2023 and anticipate what the year holds for our local economy, it is critical to understand what impacts the pandemic has had and what should be considered cyclical or structural. Among the reasons the 2023 economy is so hard to predict is that we don’t know what is temporary (inflation?) or structural (remote work?). Let’s start by looking at what impacts are envisioned to be cyclical, meaning there is a high degree of fluctuation in the situation expected:

E-commerce: As the pandemic hit, consumers underwent a “digital shift” to online shopping. According to Forbes, COVID-19 accelerated the growth of e-commerce by 4-6 years. However, sales via e-commerce have significantly declined as consumers shift back to in-person shopping. Over the next three years, e-commerce growth is expected to average between 4-5% by 2026 due to a mixture of preferences and economic conditions that, as of now, suggest slower economic growth.

Despite e-commerce slowing as a form of commerce, Marin retailers likely won’t slow momentum towards accommodating both online and physical purchases. Consumers will continue to want goods and services “just one click away.”

Commercial Real Estate (CRE): Real estate is always cyclical and despite the many warnings of commercial real estate’s doom early in the pandemic, many markets have either been resilient or experienced limited impact. In Marin County, where the limited volume of Class A properties keeps the price relatively stable, we haven’t experienced a precipitous drop in vacancy like our neighbors to the south (see “San Francisco”). While there was the exit of one large company (Autodesk) that could skew the vacancy data, albeit temporarily, most CRE firms operating in the market predict Marin to be stable, but with caution for 2023. With many office buildings owned by local owners, there isn’t expected to be a lot of turnover of properties, especially with higher relative interest rates. Although some larger footprint spaces, such as the Fireman’s Fund and Northgate Mall properties have been targeted for reconfiguration that includes housing, there aren’t many other properties in the county that might be candidates for such a transformation.

We haven’t yet seen the impact of remote work on the CRE sector in terms of high vacancies, and more companies are signaling a return to office, perhaps even at a greater rate than the current hybrid approach (see “Twitter”). Where there does remain concern (and where officials might have to get creative) is the downtown retail segment.
 

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