For South Jersey, the economic downturn caused by the COVID-19 pandemic has been an especially bitter one. Coming on the heels of the region’s best year of employment and economic growth since 1984, the health crisis has caused much pain throughout a region that relies heavily on tourism, hospitality and small businesses.
The leisure and hospitality sector accounts for 15%, or $2.8 billion, of the region’s economy, according to the Spring 2020 South Jersey Economic Review published by Stockton University’s William J. Hughes Center for Public Policy. Retail accounts for 8%, $1.4 billion, with the real estate, rental and leasing generating $4 billion – most of it in the summer – or 22% of total regional economic output.
“I grew up in restaurants and you can’t run restaurants at 50% or 75% capacity,” says Stockton Economist Oliver Cooke, one of the economic review’s authors. “The casinos have deeper pockets. God knows they’re hurting, but they have access to capital the average small business doesn’t.”
Atlantic County has been one of the hardest-hit metropolitan areas in the US, with one-in-three people out of work at the end of May as casinos stood silent, waiting for a July 2 reopening at 25% capacity. The state converted the Atlantic City Convention Center into a field hospital that was dismantled in mid-July. The Convention Center had just come off its fifth consecutive year of exceeding its booked hotel room nights goal.
“We have events booked for October and November. But we have to wait for guidelines as they go along,” says Larry Sieg, who took over as the president and CEO of MeetAC, which operates the Convention Center, in July after 23 years as head of leisure tourism in Atlantic City. Sieg remains optimistic about the area’s economy.
“One of our strengths is that we’re sitting on the beautiful Atlantic Ocean beaches. So, I think large conventions may break down to smaller halls and meetings, but [they] will still come here. We’re a drive destination and that’s going to help because people are afraid to get on airplanes. I walk the beach every night and the boardwalk is packed every night.”
Sieg says Stockton University’s recently developed urban campus housing 500 students on the Atlantic City boardwalk and the planned expansion of Atlantic City International Airport, where NJIT’s New Jersey Innovation Institute recently opened the first 66,000-square-foot building, should help the area economy as well as the convention business. But those projects, along with the recently approved $1.6-billion Ocean Wind Farm, which is expected create 15,000 jobs and generate nearly $1.2 billion in economic benefits to the state over its lifetime, are likely to have little impact in the short term.
“All of those projects are going to be important over the medium term of three-to-six years,” Cooke observes. “They’re important, but they don’t lead us out of the recession.”
Kris Kolluri, CEO of Cooper’s Ferry Partnership, a private, non-profit corporation that plans and implements high-quality urban redevelopment projects in Camden, says two new companies – Action-Pak and parent company ResinTech – have recently committed to new buildings in the city. “To have those companies come to Camden in the middle of the pandemic is a big deal,” Kolluri says. “They moved into East Camden, far away from the waterfront. They’ve hired 33 Camden residents. To us, that’s what economic development looks like.” He believes the South Jersey economy is better positioned for recovery than in previous downturns because of growth in recent years.
“Unemployment in Camden is around 19% (June). In March, it was 7.7%, which is the lowest in 28 years. The state is around 15%. If you look at 2010, the national unemployment rate was 10%, while Camden was around 20%,” Kolluri says. “A month ago, the national rate was 16% and Camden was 19%. So, Camden unemployment is moving like the state and the rest of the country, which it hasn’t done in 50 years.”
The Cooper’s Ferry CEO worries about the smaller companies, which he says are the backbone of the area’s economy here, as he also worries about evictions and softening in the commercial real estate market.
According to Cushman & Wakefield’s Southern New Jersey MarketBeat, which covers 14.2 million square feet of office space in Burlington and Camden counties, vacancy was almost 16% at mid-year, with just 187,737 square feet of leasing in the first six months of 2020.
“Companies are trying to figure out if they need as much square footage because half of the staff is going to work remotely,” says Rebecca Ting, a real estate broker for Mount Laurel-based NAI Mertz. “I think suburban offices, especially the single-story, individual office buildings that make up a lot of our market, are going to do well. People don’t have to rely on mass transportation and many of the offices are direct entry. Tenants don’t have to deal with elevators and crowded stairways.”
South Jersey’s 69.4 million square feet of warehouse and industrial space in Burlington, Camden, Gloucester and Salem counties is faring better with 3% overall vacancy. The company Target leased 913,466 square feet on Route 130 in Burlington County and Amazon leased 494,000 in Gloucester County.
NAI Mertz President Scott Mertz says the companies that are COVID-19-driven, such as packaging and shipping, are the most active in the industrial warehouse market. “We’re working with household materials companies. Anything to do with improving your home is expanding. People aren’t taking vacations so they’re spending on the house.”
Gov. Phil Murphy’s Atlantic City Restart and Recovery Working Group, which convened in July to help revitalize the city, may provide some with hope, but it will take more than committee meetings to revive the South Jersey economy. It is going to take federal and state aid to keep businesses from going under permanently.
“It actually took three or four years to recover from the Great Recession of 2009 and I think we’re going to look back on the COVID-19 recession and say it made 2009 look like a bump in a road,” says Stockton University’s Cooke. “When you think about social distancing in places like restaurants, you can clearly see the notion that the economy is going to operate at 75% of what it was at the beginning of this year is kind of utopian.”
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