California Wine Country banking leaders look for a return to normal in 2021

Not much to say about 2020 in banking that doesn’t involve coronavirus. Economic uncertainty dominated the year. Here’s what some area banking leaders say about the prospects for recovery.

Featured in this report, alphabetically, are Todd Allen of Heritage Bank of Commerce, Jeff Clark of Live Oak Bank, Marshall Graves of Bank of Marin, Brian Kilkenny of Redwood Credit Union, Celia King of Poppy Bank, Mike Ledwich of Tri Counties Bank, Alison Martin of U.S. Bank, Brandy Lee Seppi of Summit State Bank and Paul Yeomans of Exchange Bank.

Todd Allen
Todd Allen

Todd Allen

Executive Vice President | North Bay Market President

Heritage Bank of Commerce

999 Fifth Ave. #100, San Rafael 94901

415-456-6000

heritagebankofcommerce.bank

Todd Allen has lived in Marin County for more than 20 years. He joined the Presidio banking team -- now Heritage Bank of Commerce -- as North Bay Market president.

Prior to starting his financial career, Mr. Allen graduated from the University of Nevada, Las Vegas with a Bachelor of Science in marketing.

Year you assumed this position: 2007

If there were a single takeaway from 2020 in commercial banking - what would it be?

The pandemic has undoubtable taken a real toll on local businesses. It’s been particularly painful in some specific industries like food services and hospitality. The Paycheck Protection Program was especially important for businesses in those industries.

In general, however, small and mid-sized companies across the Bay Area were impressively resilient throughout 2020. Many quickly made adjustments by moving operations online or developing alternative revenue streams to navigate this unprecedented economic environment.

Certainly, being a business owner or executive is always challenging, but succeeding throughout this pandemic is an incredible achievement and we are proud to have assisted so many resourceful business people and nonprofit organizations.

How did the interests of buyers and sellers change in 2020 as it related to the market reaction to the coronavirus driven economic disruption?

In 2020, we saw both buyers and sellers become more cautious. Building cash reserves became a priority. Buying and selling was put on the back burner as everyone waited to see when and how markets would recover from the pandemic.

In what ways do you think that economic disruption fundamentally altered the North Bay's commercial real estate market, and how permanent will those changes be?

It is too soon to fully understand the long-term ramifications for commercial real estate. Hopefully, the residual effects of the pandemic will clear as we move deeper into 2021.

With all the market experienced in 2020, what surprised you the most about the North Bay commercial market's reaction to that disruption?

We saw the market rapidly adjust to its new reality. Many landlords and tenants worked together to help businesses navigate the tumultuous conditions. That coordination and cooperation was huge in overcoming some of the pandemic related challenges. Early on, we also saw many investors quickly build up cash reserves as commercial real estate purchase activity slowed substantially.

Were deals delayed and or more contentious as the result of the market disruption?

Commercial real estate activity was simply delayed in 2020 as a result of market disruptions. Everyone seemed to take a wait and see approach. As we move into 2021, we are beginning to see more projects develop. This is particularly the case in stronger sectors such as industrial and manufacturing.

Going forward - what's next for this market and does the vaccine and the possibility the coronavirus crisis might be behind us mean rapid recovery in the second half of 2021?

It’s too early to tell at this time. Much will depend on how quickly the pandemic passes. However, given the historic strength of the North Bay economy and significant cash reserves investors have built up, we are optimistic about the future.

Jeff Clark
Jeff Clark

Jeff Clark

Senior Lender

Live Oak Bank

100 B St., Suite A, Santa Rosa, CA. 95401

707-921-1102

www.liveoakbank.com

My wine and craft beverage lending career started in St. Helena with Napa Valley Bank. I have worked with wineries, breweries, distilleries and craft beverage producers throughout the United States. My experience spans the spectrum from small family operated businesses to publicly traded companies.

Year you assumed this position: 2014

If there were a single takeaway from 2020 in commercial banking - what would it be?

Let me begin by saying the following statements are my opinion only and not necessarily that of Live Oak Bank. My biggest take away is, Be Prepared! Business models were tested severely in 2020. No one could see this coming but it did prove the viability of a diversified business model and the need to remain agile.

How did the interests of buyers and sellers change in 2020 as it related to the market reaction to the coronavirus driven economic disruption?

Owners and lessors have become dependent upon each other for mutual survival.

Commercial real estate was already facing challenges before COVID. On-premise food and drink establishments have been hammered. Retail stores in general other than grocery stores have suffered due to closures and reduced traffic. The channel shift from on premise shopping to on-line was substantial.

In what ways do you think that economic disruption fundamentally altered the North Bay's commercial real estate market, and how permanent will those changes be?

No one knows the answer to that question for sure but I do trust human behavior. We are social creatures, it is not natural or comfortable to be separated. It goes against our very nature.

When the shelter in place was lifted I was impressed by tourist volume in the local destination communities. I believe there is pent up demand to socialize and travel. We may very well see a “V” shape recovery. Some folks may never feel comfortable again but as time passes and COVID is mitigated that may change. Building design, ventilation systems, seating, outdoor dining/drinking areas, etc. may have to change to expedite a return to normal.

With all the market experienced in 2020, what surprised you the most about the North Bay commercial market's reaction to that disruption?

I am impressed with the “can do” spirit of business owners to adapt and overcome the obstacles but not surprised. After all of the fires, shelter in place, business disruption, housing shortages, etc. we have become a very resilient community.

Were deals delayed and or more contentious as the result of the market disruption?

Absolutely. We did nothing but PPP loans for seven weeks, seven days a week. This set us back. Uncertainty over the economy impacted the credit culture and slowed processes. Fortunately, we rallied and had a great year. Our headquarters in Wilmington, NC. is experienced at working remote as we have had to evacuate on several occasions in recent years due to hurricanes.

Going forward - what's next for this market and does the vaccine and the possibility the coronavirus crisis might someday be behind us mean a rapid recovery in the second half of 2021?

Absent onerous government regulation and tax increases I believe we could see a “V” shaped recovery. Government needs to make permanent many of the temporary changes that were made to assist businesses.

Marshall Graves
Marshall Graves

Marshall Graves

Senior Vice President, Regional Commercial Banking Manager, Sonoma County and Central Coast

Bank of Marin

504 Redwood Blvd., Suite 100, Novato 94947

415-763-4520

bankofmarin.com

Marshall Graves is senior vice president, regional commercial banking manager, Sonoma County and Central Coast at Bank of Marin.

Prior to this role, Marshall was a senior commercial banker and wine industry specialist at Bank of Marin, where he helped wineries and winery owners understand market trends and industry-specific metrics. He earned a Bachelor of Science degree in psychology from Old Dominion University and graduated from the Wine Executive Program at the University of California, Davis. He is currently working toward his Executive MBA in Wine Business at Sonoma State University’s Wine Business Institute.

Year you assumed this position: 2020

If there were a single takeaway from 2020 in commercial banking - what would it be?

My single takeaway from 2020 in commercial banking is how critical it is for businesses to be aligned with a bank that takes the time to understand their unique needs. During stable times, the relationship with your bank can easily be overlooked.

In 2020, this relationship was of the utmost importance. At Bank of Marin, we are relationship bankers, not transactional bankers, which has served our clients well during these turbulent times.

How did the interests of buyers and sellers change in 2020 as it related to the market reaction to the coronavirus driven economic disruption?

Regarding both real estate and businesses, there was a stark contrast between the interests of buyers and sellers in 2020.

From my perspective, many buyers would be categorized as opportunistic, seeking bargain deals considering the current market conditions. Sellers on the other hand were reluctant to lower their price, assuming that the challenges that we are currently facing will be behind us relatively soon. I believe that the likelihood of sellers becoming more motivated to negotiate will increase as the pandemic continues to put pressure on businesses.

In what ways do you think that economic disruption fundamentally altered the North Bay's commercial real estate market, and how permanent will those changes be?

The most obvious impact pertains to the likelihood of employers electing to have their workforce work from home on a more regular basis. Many companies have come to realize that employees can be productive while working from home and that the company may not need as much commercial office space going forward.

I do believe that businesses will maintain office space for employees to report to, but that a reduction in total office space may be permanent.

Secondly, commercial real estate that is being leased to businesses that have historically relied on weekday traffic from the surrounding workforce might recognize a decline in demand.

If the workforce that once supported these local establishments is no longer around five days a week because they’re working from home, the real estate will likely become less desirable and ultimately reduced in value. We will also be closely watching the significant impact on CRE for businesses most affected by the lockdowns, such as those with retail, hospitality and restaurants as tenants.

Long-term, I would like to believe that many of the young, highly talented individuals that are leaving the city and moving to areas like the North Bay will eventually start their own business here versus in San Francisco or Silicon Valley. This very well could be a long-term win for the North Bay economy.

With all the market experienced in 2020, what surprised you the most about the North Bay commercial market's reaction to that disruption?

While it shouldn’t come as much of a surprise considering how the North Bay has rallied together during other catastrophic events, real estate owners’ willingness to work with their tenants was a wonderful thing to witness.

We realize that much of this was mandated, but in many cases we recognized that both sides genuinely had each other’s best interest in mind.

It was also wonderful to see all of the support for local businesses. From Sausalito to Healdsburg, our community has been hyper-focused on frequenting the restaurants and boutique shops that make the North Bay such a special place to live.

Were deals delayed and or more contentious as the result of the market disruption?

As I mentioned, some acquisitions seemed to be delayed simply due to all of the uncertainty. Conversely, if a buyer recognized long-term value in a company or piece of real estate, the transaction typically closed as usual. I wouldn’t necessarily say that we came across an unusual amount of contentious deals.

Going forward - what's next for this market and does the vaccine and the possibility the coronavirus crisis might someday be behind us mean for a rapid recovery in the second half of 2021?

Assuming that we are back to some sense of normal by June or July, I do foresee a strong second half due to the pent up demand for activities like traveling, dining out, socializing with friends, and finally being able to visit family members.

While I do believe that it will take some time for the economy to get back to where it was pre-pandemic, businesses and their employees are eager to get back to work. We will have to navigate a new normal, and many will still be apprehensive about getting on a plane or staying in hotels.

But I am optimistic about the recovery in the North Bay simply because our area caters to both sides of the dilemma. For out-of-towners who want to make a special trip to wine country, there is arguably no better place in the world to visit than Napa and Sonoma.

We also have an abundance of open space that is ideal for any Bay Area local that is concerned about traveling but needs a change of scenery. Each type of visitor supports our businesses and assists with the recovery. The North Bay community continues to prove how resilient it is and I see this situation being no different. I trust that we will all learn great lessons from this experience, making us an even stronger community going forward.

Brian Kilkenny
Brian Kilkenny

Brian Kilkenny

Credit Administrator

Redwood Credit Union

3033 Cleveland Ave., Santa Rosa, CA. 95401

707-545-4000

redwoodcu.org

As credit administrator at Redwood Credit Union (RCU), Brian Kilkenny is responsible for the growth, quality, and retention of RCU’s business loan portfolio.

Prior to joining RCU, Kilkenny spent more than six years with Exchange Bank. He holds a bachelor’s degree in agricultural business management from Oregon State University and began his banking career at Bank of America.

Year you assumed this position: 2019

If there were a single takeaway from 2020 in commercial banking, what would it be?

Resilience. What we’ve seen since last March is a resilient group of small business owners that are weathering the constant change of rules, regulations, and various degrees of closures.

How did the interests of buyers and sellers change in 2020 as it relates to the market reaction to the coronavirus-driven economic disruption?

Reactions vary between property buyers and sellers. Buyers believe there will be a softening of the market, while sellers believe there’s price stability and we may see increases when the economy returns to “normal.”

There’s a spectrum of challenges by industry, with certain industries affected significantly more than others. For example, the restaurant and hospitality industries have been most adversely affected. The SBA’s payment subsidies have been one of the largest aids for restaurant and hospitality owners.

On the other hand, certain food and beverage industries, construction, manufacturing, professional services, home/garden, and technology have fared much better. Some food and beverage manufacturers are creating at-home kits and packages to serve people who want to recreate an experience in their own homes that they used to go out for.

Home and garden stores are catering to the many people investing in and enhancing their homes and they’re selling products and services at levels much higher than pre-pandemic. There’s a lot of optimism that this trend is here to stay, especially in this region with its nearly year-round good weather.

In what ways do you think economic disruption fundamentally altered the North Bay's commercial real estate market, and how permanent will those changes be?

What we’re seeing, thankfully, is quite a bit of stability within the commercial real estate market as a whole.

Again, certain industries are being adversely affected, but as a whole, we’re seeing price stability and have not seen a large number of distressed properties. A silver lining to the North Bay commercial real estate market is that we don’t have an issue with over building and we didn’t have a high vacancy rate entering the pandemic. That bodes well for us coming out of this—not having long-lasting disruption.

With all the market experienced in 2020, what surprised you the most about the North Bay commercial market's reaction to that disruption?

We’re pleasantly surprised to see a relatively low number of distressed office and retail properties.

The resilience of our local small businesses has become evident in their ability to alter and modify their approach and delivery to customers, to meet customers where they are. Despite the odds, many of them have stayed solvent, kept the doors open, and continued to pay employees.

Were deals delayed and/or more contentious as the result of the market disruption?

We’ve seen disruption, at times, on the appraisal side. With the amount of unknowns and uncertainty in the market, we’ve seen more fluctuations and valuations. There’s been a lot more on the plate of our commercial business services department due to handling PPP loans and PPP forgiveness. This has caused us to process at a much higher volume than historically.

Going forward, what's next for this market and does the vaccine and the possibility the coronavirus crisis might someday be behind us mean a rapid recovery in the second half of 2021?

Everyone is hoping for recovery and, from a pandemic standpoint, we’re optimistic that there’s relief coming in the second half of the year.

That being said, we don’t know how the vaccine will take effect and how quickly we can return to normal—our new normal. We’ve seen businesses alter or even completely change their business model to serve their customers or take advantage of an opportunity that was created. These modifications, in many cases, are forever changes within that business that will allow it to be more diversified and efficient. For Redwood Credit Union, we’ll continue to do all we can to ensure a bright financial future for our business members and the community as a whole.

Celia King
Celia King

Celia King

Vice president and commercial loan officer

Poppy Bank

438 First St., Santa Rosa 95401

707-636-9000

poppy.bank

Year you assumed this position: 2020

If there were a single takeaway from 2020 in Commercial Banking – what would it be?

Adaptability and resourcefulness were key to economic survival especially in an ever-changing and challenging environment such as 2020.

How did the interests of buyers and sellers change in 2020 as it related to the market reaction to the coronavirus driven economic disruption?

Seller’s interests were largely unchanged in 2020 however, as leases expire on office and retail space, I would expect some owners will be more motivated to sell than others.

Buyers did pause to assess the extent of the pandemic’s impact on their liquidity and cash flow before proceeding with their planned purchases but in many cases, the current low interest environment was a significant deciding factor to proceed.

In what ways do you think that economic disruption fundamentally altered the North Bay’s commercial real estate market, and how permanent will those changes be?

Demand for office space has been fundamentally altered. If there is a lesson we can all learn from this pandemic it is that working from home saved the day!

I do not foresee office space being obsolete or the workforce working from home at the current levels post pandemic however, many businesses are reconsidering their footprint now that they have had the time to adapt to this model which will inevitably affect the commercial real estate market in the North Bay.

With all the market experienced in 2020, what surprised you the most about the North Bay commercial market’s reaction to that disruption?

It was surprising to see the level of activity in the commercial market during 2020 given the uncertainty and restrictions affecting the local economy.

Were deals delayed and or more contentious as the result of the market disruption?

Yes, deals were initially delayed during the first shutdown as we awaited guidance as to the severity and impact of the pandemic. Once the CARES Act was enacted, there were further delays in conventional and SBA financing as all available resources were allocated to the PPP loan program.

Deals were not more contentious but additional due diligence was performed to assess the initial and potential long-term impacts of the pandemic to the business as well as management’s ability to sustain financial performance while keeping employees and customers safe.

Going forward – what’s next for this market and does the vaccine and the possibility the coronavirus crisis might someday be behind us mean toward a rapid recovery in the second half of 2021?

Although the vaccine brings much hope to the possible end to of the current pandemic, I do not anticipate rapid recovery in the second half of 2021 as the full impact to the market remains to be seen once federal aid and payment/lease deferments expire.

Mike Ledwich
Mike Ledwich

Mike Ledwich

Vice president and relationship manager, North Bay Region

Tri Counties Bank, Santa Rosa branch

819 Fourth Street, Santa Rosa 95404

800-922-8742

tcbk.com

Mike Ledwich joined Tri Counties Bank in 2020 to help develop and manage customer relationships in Sonoma, Napa and Marin counties. Born and raised in Napa, Ledwich has nearly 35 years of financial experience in the North Bay.

He started his financial services career with Napa Valley Bank in 1986. More recently, prior to joining Tri Counties Bank, he was vice president and senior relationship manager for Rabobank.

Ledwich holds a Bachelor of Science degree in business administration from California State University, Sacramento, and an MBA in business management from Golden Gate University.

Year you assumed this position: 2020

If there were a single takeaway from 2020 in commercial banking - what would it be?

Do not take anything for granted.

How did the interests of buyers and sellers change in 2020 as it related to the market reaction to the coronavirus driven economic disruption?

Many people fled urban areas and relocated to more rural areas due to the pandemic. Our branch footprint allows us to serve businesses throughout Northern and Central California, including the North Bay.

In what ways do you think that economic disruption fundamentally altered the North Bay's commercial real estate market, and how permanent will those changes be?

People and businesses learned that centralization of staff is not necessary for business. Humans are social so I do not think it is permanent, but I do think it will take longer than originally thought to get back to pre-pandemic life.

With all the market experienced in 2020, what surprised you the most about the North Bay commercial market's reaction to that disruption?

My biggest surprise is that real estate values continued to climb.

Were deals delayed and or more contentious as the result of the market disruption?

I do not think deals were delayed, however I do believe that there were less banks willing to compete for commercial real estate loans given the turbulent environment.

Going forward - what's next for this market and does the vaccine and the possibility the coronavirus crisis might someday be behind us mean a rapid recovery in the second half of 2021?

As long as interest rates remain low, I do not see declines in the commercial real estate market.

Alison Martin
Alison Martin

Alison Martin

Senior vice president, Wine Division

U.S. Bank

880 Jefferson St. Napa CA 94559

707-226-9391

usbank.com

As senior vice president, Wine Division, at U.S. Bank, Alison Martin spearheads client relationships in the nonprofit and wine industry sectors across the Bay Area

Year you assumed this position: 2014

If there were a single takeaway from 2020 in commercial banking - what would it be?

That we can still maintain close relationships with our clients and prospects despite this new virtual environment. I was continually impressed by the innovativeness and strength we saw in our clients as they adapted their business models to this new environment.

How did the interests of buyers and sellers change in 2020 as it related to the market reaction to the coronavirus driven economic disruption?

Companies that were both already strong prior to the coronavirus and not substantially impacted as a result saw this as an opportunity to increase market share. These companies continued to be acquisitive, especially given potential for future tax law changes.

We also saw that sellers looked to close their deals as quickly as possible to avoid reduced valuations or decided to hold off altogether given market disruption.

In what ways do you think that economic disruption fundamentally altered the North Bay's commercial real estate market, and how permanent will those changes be?

With the shift to remote operations, I think companies will very closely evaluate size and location needs going forward as leases come due. In many cases, the remote workforce model has proven successful, but there is consensus that there are productivity benefits to an “in office” environment at least on a part-time basis.

We expect the reduction in office space will be somewhat offset by the addition of satellite offices for employees of companies based elsewhere in order to give employees an option to “go into the office” that is much closer to home. With a number of Bay Area employers considering staying with a remote workforce model, this creates an opportunity for growth in this region in several ways.

With all the market experienced in 2020, what surprised you the most about the North Bay commercial market's reaction to that disruption?

I was surprised most by the resiliency of wineries that are dependent mainly on direct-to-consumer sales at their physical locations. This sales model disappeared overnight once stay-at-home orders went into effect and with little to no warning or any understanding of how long it might last.

It was incredible to see how these wineries pivoted to virtual strategies to engage with consumers while they were closed and how the wineries were able to grow customer loyalty during this period.

Were deals delayed and or more contentious as the result of the market disruption?

While some deals seemed to have mild delays given the current environment, we thankfully did not experience any contentious situations. We’ve seen a fair amount of extra oversight on behalf of all parties during M&A transactions, but nothing that is far out of the ordinary course of business and that couldn’t be resolved in a manner that was mutually acceptable.

Going forward - what's next for this market and does the vaccine and the possibility the coronavirus crisis might someday be behind us mean a rapid recovery in the second half of 2021?

Getting restaurants and wineries reopened for outdoor dining and tastings as soon as prudent will not only help keep people employed, but drive economic recovery across the North Bay.

The North Bay is positioned well to recover quickly, as the vaccine becomes more readily available, given how strong tourism is from both California and out-of-state visitors. People are eager to travel again and celebrate life moments when it’s safe to do so. I think we’ll see more people staying closer to home to do that and that gives the North Bay an advantage in this recovery.

Brandy Lee Seppi
Brandy Lee Seppi

Brandy Lee Seppi

Executive vice president and chief lending officer

Summit State Bank

500 Bicentennial Way, Santa Rosa, CA. 95403

707-568-6000

summitstatebank.com

Prior to joining Summit State Bank, Brandy Lee Seppi served in various roles in commercial banking for City National Bank and Umpqua Bank. She grew up in Healdsburg and is a graduate of the University of California San Diego with a degree in economics, the ABA Stonier Graduate School of Banking at the University of Pennsylvania and The Wharton School’s Leadership Program.

Year you assumed this position: December 2016 as chief lending officer

If there were a single takeaway from 2020 in commercial banking - what would it be?

Expect the unexpected and be flexible with the solution.

How did the interests of buyers and sellers change in 2020 as it related to the market reaction to the coronavirus driven economic disruption?

We found that interests of buyers and sellers didn’t change much through the pandemic but the volume of transactions declined, as both parties were uncertain of what leverage they had to negotiate in such an uncertain market.

In what ways do you think that economic disruption fundamentally altered the North Bay's commercial real estate market, and how permanent will those changes be?

The North Bay region is fortunate to be rich with industry diversity and thus although the area was impacted by the pandemic and fires in 2020, we are not aware of any adversarial conditions that would render a permanent, negative impact on the commercial real estate market.

To the contrary – due to the massive residential exodus out of dense, metropolitan areas, we may also see more permanent, positive impacts if companies also follow and move their offices and production spaces to the North Bay to have more space. Only time will tell.

With all the market experienced in 2020, what surprised you the most about the North Bay commercial market's reaction to that disruption?

We were pleasantly surprised that Sonoma County’s drastic job losses in Q2 rebounded so quickly in 2020, when the shuttered economy was allowed to reopen.

Were deals delayed and or more contentious as the result of the market disruption? Due to the uncertainty in the market, deals did get delayed more than usual – mainly by buyers when the purchase was not a time sensitive transaction. That said, this didn’t move the needle in a negative way for Summit. We are open for business.

Going forward - what's next for this market and does the vaccine and the possibility the coronavirus crisis might someday be behind us mean a rapid recovery in the second half of 2021?

The vaccine is giving many people a sense of security that the negative effects of the pandemic are soon behind us. That said, is it uncertain at this point in time if the recovery will be rapid in nature.

Habits of going out to dine, leisure travel and spending money (on your business or personally) will come back, that is certain, but the timing of the full recovery could take longer than the second half of 2021. Consumers and companies are cautiously optimistic as they proceed through this pandemic, and the importance of cash and access to liquidity is key to their financial survival.

Paul Yeomans
Paul Yeomans

Paul Yeomans

Senior vice president, wholesale banking sales manager

Exchange Bank

545 Fourth St., Santa Rosa 95401

707-524-3301

exchangebank.com

Yeomans has over 30 years of experience in the banking and finance industry and oversees Exchange Bank’s Commercial Banking, Construction and Mortgage Lending and Small Business Administration.

Year you assumed this position: 2018

If there were a single takeaway from 2020 in commercial banking - what would it be?

The single commercial banking takeaway from 2020 is the importance of knowing your customers. Having a good working relationship with our customers has allowed us to serve their needs in a more meaningful way throughout the pandemic.

Being knowledgeable and knowing how to support our customers and community during difficult times is one of Exchange Bank’s core values: Commitment. Exchange Bank’s legacy is one of financial leadership and community support, which we continue through responsiveness to the needs of our customers and communities.

How did the interests of buyers and sellers change in 2020 as it related to the market reaction to the coronavirus driven economic disruption?

The commercial real estate market slowed in 2020. Many property owners were trying to support their renters to help them get through the pandemic. Buyers interested in investing in new properties spent more time on due diligence. The economic circumstances of renters, among other things, strongly influence a property’s value, and buyers need to understand all factors before they invest.

In what ways do you think that economic disruption fundamentally altered the North Bay's commercial real estate market, and how permanent will those changes be?

The economic disruption of 2020 was significant. Retail, restaurants and accommodation industries were very hard hit. The effects of 2020 are clearly visible when you walk down main street. Industrial markets on the other hand are doing well. The pandemic has changed the way people buy—there has been a big swing toward online shopping which has helped maintain industrial businesses who distribute these goods.

The multi-family market has not changed and there are two sides to the office building debate; one side believes demand for office space will return over time and the other side believes that working from home will remain a permanent trend. The outcome is still to be seen. The permanent effects of the pandemic-induced disruption on retail is uncertain—no one could have anticipated that this would happen or be prepared for it.

With all that the market experienced in 2020, what surprised you the most about the North Bay commercial market's reaction to that disruption?

I’m most surprised at how long the disruption has lasted and the hard hit that retail businesses have taken. Small businesses were really impacted and so many businesses have closed. Exchange Bank was so happy to be able to support our business customers with nearly 1,800 SBA PPP loans totaling $260 million.

A good portion of those loans supported local non-profits and charitable organizations who provide critical, life-sustaining services to those in our community who are in most need.

Were deals delayed and or more contentious as the result of the market disruption?

Commercial real estate deals have been delayed. Buyers are requesting more time to make sure they understand the current value and cash flow a property and trying to determine when or if it will return to normal before they invest. It’s a bit of a guessing game during the pandemic.

Going forward - what's next for this market and does the vaccine and the possibility the coronavirus crisis might be behind us someday mean a rapid recovery in the second half of 2021?

The vaccine is certainly an important part of the recovery process and will help to build people’s confidence in wanting to get back to how things were before the pandemic. I don’t believe it will happen by mid-year though. Given the current rate of vaccination, I forecast it won’t be until the end of 2021 or early 2022.

Consumer confidence and the reestablishment of previous shopping habits post-vaccine will help our local economy to recover and time will tell whether consumer behavior has permanently changed.

The reopening of restaurants, wineries and hotels will be the trigger—once people can travel again, we will see the return of tourism to Sonoma County and hopefully, the much-needed boost to our local economy. I believe people will want to return as soon as they can to our beautiful corner of the world.

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