Special Report

Convergence of Events Creates Unique Opportunities

• The pandemic accelerated behavioral changes driven by an aging Millennial and Baby Boomer populations
• Stockpiled savings and over $5 trillion in stimulus are driving record retail sales as the economy reopens
• Rapid delivery of vaccines is paving way for economic recovery and boost to commercial real estate

Strong Performing Properties Likely to Maintain Momentum

• Behavioral trends boosted Self-Storage occupancy to all-time high; Unbundling of households likely to sustain trend
• Stimulus has maintained high Apartment rent collections
• Strong performing Industrial saw a modest rise in vacancy due to record big box warehouse construction

Opportunities Exist in All Property Types

• Seniors and Student Housing are likely to bounce back as vaccinations bring students and residents back
• Hotel occupancies have doubled from 25% last April
• Well-performing single-tenant and necessity Retail and outdated malls ready for reuse provide various options

Sources: Marcus & Millichap Research Services, U.S. Census Bureau

Stimulus and State Reopenings Bolster Economy

• The $1.9T fiscal stimulus passed in March is beginning to make its way through the economy
• Spending surged last month as consumers spent stimulus checks and states began lifting lockdowns
• As a result, restaurants, bars and other experiential retailers may see demand accelerate in the near-term

Heightened Spending Supports Nearly All CRE

• Increased consumption directly supports Retail, Hospitality and Self-Storage sectors
• eCommerce sales drives demand for Warehouse and Industrial space
• Stronger personal balance sheets also supports tenants’ ability to pay their Apartment rent

Looking Forward, Outlook Getting Brighter

• As the vaccination effort continues and states further ease restrictions, we could see activity rebound sharply
• Although their will likely be speed bumps on the road to recovery, the economy seems to be on the right path

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* Through March

Medical Solution Setting Stage for Major Recovery

• 20% of U.S. adult population fully vaccinated, with an average of 3 million vaccines delivered each day
• 916,000 jobs were created in March; 12 times as many people flew in first week of April as same week last year
• Consumer and business confidence surged in March

Tailwinds Emerging for Struggling Property Types

• Increased air travel signals positive outlook for Hotels
• Elevated personal savings to support Retail – particularly sit-down restaurants, entertainment and service retailers
• Inoculated elderly population likely to return to Seniors Housing, providing strong boost to occupancies

Economic Recovery Will Benefit All Commercial Real Estate

• Wave of consumption will support Industrial demand
• Apartments will benefit from unbundling of households
• Office recovery may take longer, but rising number of companies are announcing plans to return to the office

 

 

Sources: Marcus & Millichap Research Services, The Conference Board

* Forecast
Sources: Marcus & Millichap Research Services, U.S. Census Bureau, Moody’s Analytics

Housing Supply Falls Short of Surging Demand

• Surge in home sales pushed median home prices to a record high, as homes for sale fall to new low
• Climbing cost of construction materials may continue to weigh on new home construction

Demographic Trends Driving Housing Demand

• Historically low mortgage rates and pandemic-driven need for space play key role in elevated home sales
• But a bigger driver of housing demand is growing household formation and the aging Millennial population
• The post-pandemic economic recovery is expected to accelerate household formation and housing demand

New Household Formation Will Benefit Real Estate

• Apartment construction expected to fall short of rising demand, putting downward pressure on vacancies
• This will boost housing investment performance
• Increased consumption from new households likely to also support Retail and Industrial performance

What is Included in the $1.9 Trillion Stimulus Bill?

• The stimulus provides funding for small business through the PPP, a critical action to maintain employment
• It allocates billions of dollars to support hard-hit sectors like restaurants, healthcare, childcare and airlines
• Enhanced unemployment benefits, $1,400 stimulus checks and housing assistance would offset lost incomes

New Stimulus Package Would Provide Economic Boost

• The first and second stimulus bills provided jumps in retail sales, while sales fell in 4Q 2020 as the stimulus burned off
• This new bill would allow households to continue spending, helping support retail sales and job retention

Stimulus Could Benefit All Commercial Real Estate

• Increased consumption directly boosts Retail and Industrial performance, and potentially travel and Hotels
• Supplemented incomes and job security allow tenants to better cover Apartment and Self-Storage rents
• The stimulus would also help set the foundation for the post-pandemic recovery, benefiting all property types

*Through January
Adjusted for inflation using core PCE
Sources: Marcus & Millichap Research Services, U.S. Census Bureau, BEA