The new round of government stimulus—a $1.9 trillion package that is expected to pass the House of Representatives shortly after having been sent back from the Senate this week—will set the stage for economic recovery and will serve as “critical supports” for virtually every commercial property type, according to a recent analysis from John Chang, vice president and senior director of research at Marcus & Millichap.
This is clear from previous stimulus packages, which aided tenants’ ability to pay rent, helped fuel consumption and sales and allowed companies to keep their doors open and people employed, Chang says. This new bill, at a whopping $1.9 trillion, will turbo charge these efforts, plus provide one additional benefit. “It will give investors more clarity on the path ahead, allowing them to make business decisions and keep their eyes on the horizon,” Chang says.
The latest round of stimulus also includes more Paycheck Protection Program money. This support is critical, Chang says, because small businesses create half of US jobs and are often concentrated in industries hard hit by the COVID-19 crisis, such as restaurants, schools, airlines, and public transit.
The stimulus package also extends federal unemployment benefits through August 29 with a weekly benefit of $400. The first round of stimulus included $600 per week, which lasted through the end of July 2020, and the second package allowed a weekly benefit of $300 through March 14. This will benefit nearly every CRE sector, Chang says, with a particular focus on apartments, retail real estate, self-storage, hotels, and industrial.
“Considering the employment rate is still above 6% and over 700,000 people are filing their initial jobless claim each week, it’s very apparent that the risk to workers and the economy remains significant,” Chang said. “The good news is a lot of jobs could come back pretty quickly once we have a critical mass of vaccinations, assuming that programs like the Paycheck Protection Program keep enough businesses open to fuel recovery.”
The latest round of stimulus also includes $25 billion in housing assistance to help cover rent payments for tenants affected by the pandemic, and $1,400 stimulus checks for many Americans.
“Each time the stimulus checks go out, it gives the economy a massive adrenaline injection,” Chang says. This is particularly true for retail, where spikes in core retail have occurred with each round of stimulus payments. The $1,200 checks last year sparked a $40 billion boost in core retail sales in May 2020 and the $600 checks pumped up January retail sales by $23 billion. And similarly, the loss of retail sales in the fourth quarter coincides with most of the 2020 stimulus burning out.