Recent COVID-19 Surge Clouds Business Outlook

A surge in new COVID-19 cases across the South and Southwest signal the possibility of renewed business closures,  Marcus & Millichap predicts in a new research brief. 

Those closures, despite June business reopenings that supported record hiring or rehiring, cloud July’s job outlook, especially in Texas, Florida, and Arizona, the national real estate sales and financing firm’s monthly briefing predicts.

The dramatic rise in COVID cases —  especially in Texas, Florida and Arizona — is forcing businesses with a large public component either to pause reopenings or close again, especially bars and gyms, according to the Los Angeles-based firm.

The result: employees who returned to work in June may find themselves furloughed a second time, the firm’s July research predicts.

Renewed furloughs this month face an additional complication.  Federal unemployment benefits are set to expire before August unless the U.S. Congress provides additional stimulus. The impact on the real estate industry, especially apartment complexes,  could be significant as more people face impaired financial security and are forced to prioritize what bills they are able to pay, the July brief warns.

Meanwhile, although record numbers of people returned to work in June, not everyone is working full time, according to the brief.  The number of people who want to work more hours but can’t due to unfavorable business conditions or other economic reasons remained above 9 million in June — about double February’s total before the coronavirus took hold across the nation, according to the brief.

And although 4.8 million people returned to work in June, the unemployment rate remains at 11.1 % with 14.7 million fewer jobs available than in February, the brief said.

Private messenger and courier services has remained steady, despite the onslaught of the virus, according to the brief. Despite health concerns, commerce, including commercial real estate transactions, continue to take place, and couriers ferrying documents back and forth facilitated $10 billion worth of commercial real estate trade in May, according to the brief.

Marcus & Millichap’s July outlook was more sobering than June numbers initially indicated when restaurants, hotels and warehouses began rapidly rehiring as states lifted lockdown restrictions that were put in place in March.  Nearly 1.5 million people returned to jobs in restaurants, bars and nightclubs.  Accommodation employment associated with recovering hotel and motel occupancy rose by 22 % in June as hotel occupancy rates began recovering after bottoming out in early April, according to the July brief.  Tourism jobs, especially scenic and site-seeing transportation rose 19.8 % in June.

Meanwhile, hiring in the trade and transportation sector associated with merchandise storage and warehousing remained strong.  The need to maintain inventories amid supply disruptions coupled with a pandemic-driven boost in e-commerce spending placed renewed emphasis on the importance of warehouse and distribution space, the research brief said.