The Azucena Take: Stimulus is Good for the Economy

money_stockphoto.jpeg

Talks about a new round of stimulus continue to dominate the news and you’re wondering how this will affect you? Truth is that it will affect you a lot and it’s not just because of the additional checks. These stimulus packages have helped stabilize the economy while allowing us to get through the pandemic.

Back in late January, Marcus & Millichap looked back at the impact the CARES Act had on the economy. The results was a reversal of the economical damage caused by the pandemic. It put a halt to unemployment while also renewing confidence in the economy. Here is a breakdown of the key findings:

  • Total employment tanked by 22 million in March but the economy added +12 million jobs starting in June.

  • Unemployment claims spiked to 6.8 million at the start of the pandemic. They have now dropped to 892K by December.

  • Retail sales suffered by -$52 billion in March but jumped by +84 billion in July.

  • However, retail sales did fall by -14 billion in November.

Screenshot 2021-03-05 14.02.09.png

The CARES Act did help stabilize the economy but it was only designed to do so for 6 months. Given that the pandemic is still ongoing, there were some minor losses later on in 2020. A second stimulus was passed but it was smaller than the previous one (which will protect the economy for only a few months).

Economists believe that a third stimulus will help to ensure economic stability. While vaccine roll outs have been successful, it will not reach most of the population until the 3rd or 4th Quarter. A third stimulus is necessary to ensure economic stability (especially one that could last for 5 to 7 months). Any delay will undermine the gains made with the last stimulus.

Why does this all matter for commercial real estate investors? The trends that define commercial real estate are correlated to the health and performance of the overall economy. While office space has suffered, apartments and industrial property had gained traction after the passing of the CARES Act.

Smart investors are preparing for a post-pandemic economy and commercial real estate will be the foundation of this new growth.

Carlos Azucena