Hotels and Retail Should Recover Faster Than Expected

As more Americans are vaccinated, expect certain segments to recover faster over the next 90 days, according to John Chang, senior vice president and director of research services at Marcus & Millichap.

“The property types that will see the impact fastest are hotels and retail, particularly sit-down restaurants, entertainment, venues and service retailers,” Chang said in a recent video. “But virtually every property type will have a strong tailwind.”

Other sectors that have struggled through the COVID recession will also see a boost in demand after widespread vaccinations, according to Chang.

“As elderly people, now vaccinated, feel more safe, seniors housing can see a pickup in admissions,” Chang says. “Housing movements have been down through the pandemic, but the demand was likely postponed, not eliminated. Pent up demand will likely give seniors housing occupancies a strong boost.”

The “in-favor” sectors will also benefit from vaccinations. Chang says accelerating consumption will support industrial demand, while apartment growth will be boosted by unbundling households.

The one significant question mark is office. “Offices are the one property type that could take a while to recover,” Chang says. “But several companies, including Google, Wells Fargo, Amazon, Morgan Stanley and many more, have announced their plans to return to the office. Companies may have more flexibility with remote work going forward, but it’s becoming clear that most do not plan on abandoning the office.”

Overall, Chang says that the economy is fast approaching a tipping point since the onset of the pandemic.

“We said that the full recovery will require a medical solution and that medical solution looks like it’s hitting a critical mass,” Chang says.

That critical mass is coming quickly. Chang says about 20% of the US population is vaccinated and about 3 million shots are being administered daily. “Going forward, nearly 1% of the US population will be vaccinated on a daily basis. In a relatively short period of time, the next 60 days or so, most of the US will be vaccinated and released from house arrest.”

In March, 916,000 jobs were created, and the unemployment rate came down to 6%. Also, consumer confidence surged 19.3 points last month, which was its biggest gain since 2003. “Granted, we still have a long way to go before the economy and society fully heal from the pandemic, but the metrics are moving in the right direction and they’re moving fast,” Chang says.