The Economy at a Turning Point: REITs and Commercial Real Estate Outlook at Mid-Year 2020
The economic damage caused by COVID-19 is unprecedented, but the economy may be ready to start recovering in the second half of 2020.
June 11, 2020 | Nareit Research | reit.com
When is the Economy Going to Reopen?
The good news about the outlook for the economy and commercial real estate as of early June is that we are likely at a turning point for consumer spending and business activity. The stay-at-home orders and business closures in response to the spread of COVID-19 are easing across most cities and states, and sales are likely to increase as stores reopen in June.
The bad news is that the early stages of recovery will be tentative and uneven. Many shoppers and employees will be cautious about going back to stores, gyms, restaurants or the workplace even after restrictions are lifted, and may remain hesitant as long as the pace of new cases is high and there is no vaccine or treatment. There will likely be local and regional setbacks as virus cases flare up again, requiring renewed tightening of social distancing measures.
Furthermore, the tidal wave of layoffs and business failures has caused economic damage that will take time to resolve. The speed and size of the rise of unemployment in just two months is unprecedented, with the unemployment rate going from 3.5% in February to 14.7% in April. Many of these workers may return to their old jobs, and indeed, the job market staged a small rebound in May with a 2.5 million increase in payroll employment and decrease in the unemployment rate, to 13.3%. Others will not go back to work right away, however, either because their position has been eliminated or because their employer closed permanently. Firms that have closed permanently will eventually be replaced in the marketplace, but the process of organizing a new business and arranging financing also takes time.
