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American dollars grow from the ground

Many economists aren’t just expecting a recovery this year—but one with the potential for significant economic growth.

In a new research video, John Chang, SVP and director of research services from Marcus & Millichap, gives a positive outlook for the economy and the commercial real estate sector based on new reports from leading economists.

“Over the last year, we have navigated numerous, very serious challenges, but the outlook for 2021 holds great promise for the economy and for commercial real estate,” Chang says in the video. “Looking at the economy, the outlook is strengthening dramatically. In fact, most economists are now forecasting that 2021 will deliver the strongest growth since 1984.”

Chang outlines three underlies as the catalyst for growth this year. Stimulus is at the top of the list. Following the $2.2 trillion CARES Act package in March 2020, Congress passed an additional stimulus bill in December valued at $900 billion. Now, a third round of stimulus is being discussed. President Biden is pushing a $1.9 trillion round, but Chang expects the ultimate bill to be lower.

“There is considerable debate over whether there is enough congressional support for that much of an infusion,” says Chang, saying that a smaller package totaling around $760 billion could be negotiated.

Still an additional round of stimulus will come with major economy-boosting benefits.

“The new round of stimulus would likely include stimulus checks. They are suggesting about $1,400 on top of the $600 already in process,” says Chang. “I am just speculating here, but the new stimulus could expand or extend federal unemployment benefits.”

Although the debate over the stimulus package has focused on stimulus checks, there is more value in expanding unemployment benefits.

“Janet Yellen, the former chairman of the Federal Reserve and the expected Treasury Secretary, has already indicated that she believes the federal unemployment benefits will deliver the biggest bang for the buck,” says Chang. “Additional stimulus checks and more unemployment benefits will give the economy another boost, increasing consumption and helping people that were hit the hardest by the pandemic to cover their expenses.”

The vaccine is another reason that growth is on the horizon.

“We are making substantive headway toward inoculating the US population. Although there have been setbacks and the process is not going as quickly as hoped, many believe the Biden Administration will more aggressively pursue measures to get the pandemic under control,” says Chang.

Finally, renewed economic confidence will also help give the economy a boost. According to Chang, there is $4.5 trillion in savings and money market accounts that represent the pent-up demand in the market. This funding will help to increase consumer spending once people feel safe again.

“As these three factors align, the potential impact on the commercial real estate market could be enormous. In the second half of 2021, assuming that we achieve a critical mass of vaccine distribution, we could see stores, hotels and entertainment venues reopen,” says Chang. “That would bring back jobs and spending, and in turn unlock household formation, creating demand for apartments.”

The economic growth will also help to drive shopping center and travel demand, and as the economy strengthens, companies will launch new office strategies.

All asset classes are set to benefit.

“If the economic growth gets even close to the 5%, 6% or 6.5% growth rates that I am seeing from many well-known economists, then the prospects of a major real estate revival in 2021 will be very positive,” says Chang. “That would set the stage for 2022 and beyond.”

 

Source:  GlobeSt.