Limon Net Lease Group

Marcus & Millichap Research Services

$900 Billion Stimulus Package to Support  Economy, Bolster Real Estate Outlook

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COVID-19 STIMULUS PACKAGE SPECIAL REPORT
1/15/2021 by Marcus & Millichap Research Services

After significant delay, Congress passed a stimulus bill that will serve to limit the threat of a double-dip recession after economic growth faltered in December. The bill includes additional support for the unemployed, rental assistance, and direct cash payments to individuals. Small businesses, cultural institutions, and other hard-hit industries will also receive help.

Key Features Include:

  • How the stimulus package will support commercial real estate revenues
  • Impact of legislation on economic growth prospects in 2021
  • Specific industries targeted by bill for additional support

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What’s Driving Interest Rates Higher?

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By Marcus & Millichap’s Research Services

Economic Outlook Placing Pressure on Interest Rates

  • The Georgia Senatorial run-off results reduced political uncertainty and raised the chance of additional stimulus
  • This has strengthened the 2021 economic outlook
  • As a result, the 10-Year Treasury is back up to 1.1% from 0.5% back in August, but still far from 1.8% a year ago

Rising Rates Already Impacting Commercial Real Estate

  • Apartment loans have seen rates rise 30-40 basis points over the last few weeks to the upper 2% to mid-3% range
  • Quality Office & Industrial rates run in the low 3% range; Retail Centers & Self-Storage can fall in mid-to-upper 3%
  • Hotels financing remains challenging, but available

Upward Momentum Likely to Continue

  • Advancements in the economic and health care fronts are signals that interest are likely to continue rising
  • Diminishing uncertainty is also taking more investors off the sidelines, increasing competition in the market
  • For inventors who plan to buy this year, locking in these favorable rates may prove beneficial in the long-ter
* Average cap rate through December 2020; 10-year treasury through January 13, 2021
Includes apartment, retail, office, and industrial sales $1 million and greater
Sources: Marcus & Millichap Research Services, CoStar Group, Inc., Real Capital Analytics, Federal Reserve

 

2020 Election Results Together with New Stimulus and Vaccine Distribution Bolster Real Estate Investment Outlook

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Political division in Congress will limit the scope of legislative reform, providing consistency in policy that will help lay the groundwork for future commercial real estate investment decisions. Recently enacted stimulus and continued vaccine distribution create potential for notable economic growth in the second half of 2021, while low interest rates emphasize the returns of real estate assets.

Key Features Include:

  • Tax reform outlook and other notable legislation
  • Role of new stimulus and vaccine rollout on 2021 economic outlook
  • Key stimulus provisions for real estate investors

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RETAIL SALES RESEARCH BRIEF: DECEMBER 2020

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Spike in Positive Cases Results in Tighter Lockdowns, Pares Spending 

By Marcus & Millichap Research Services 12/2020

Dwindling income and renewed closures push retail sales lower. The last of the supports from the CARES Act are winding down, including an extension of state-level unemployment benefits that will expire at the end of this year. Furthermore, several major cities have ordered businesses to temporarily shutter or reduce capacity.

As a result, core retail sales declined 0.8 percent in November, marking the second consecutive monthly decline. Year over year, core retail sales have climbed 5.9 percent, largely due to a lack of alternative spending options. Only a handful of sectors that have already thrived through the health crisis posted a monthly gain.

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Will Holiday Sales Bolster Commercial Real Estate Performance?

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  • Current Retail Landscape Remains Strong
    • Core retail sales are up 6.5% from last year; online sales grew 29.6% Y-O-Y and make up 19.4% of core retail sales
    • While online sales have made up most of the gains, store-based sales have also increased 2.3% Y-O-Y
    • Gains for store-based retailers are mostly concentrated in home repair, groceries, and necessity-based retailers
  • Holiday Sales Could Provide Boost to Real Estate
    • Holiday retail sales could have a significant impact since consumption drives about 2/3 of the U.S. economy
    • Current forecasts for sales growth vary greatly, from 1% to 5% growth over last year’s holiday sales
    • Any growth in sales will help sustain the economy until a medical solution unlocks a wave of spending
  • Holiday Season Expected to Drive Retail Sales
    • Holiday sales could reinvigorate underperforming Retail sectors, such as apparel and entertainment
    • Consumption may increase Self-Storage and Industrial demand; seasonal hiring would support Apartments

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