Unpacking Biden’s First 100 Days And What It Means For CRE

The messages are mixed when it comes to the impact of President Joe Biden’s first 100 days in office on commercial property markets, according to a recent analysis from Cushman & Wakefield.

President Biden’s $1.9 trillion American Relief Plan has lifted near-term growth forecasts, with median real GDP predictions being revised upward to 6.2% since December.  While inflation is expected to increase modestly, the Fed also is maintaining what C&W analysts call “a highly accommodative monetary policy,” and the debt markets are functioning well as huge amounts of capital are set to be deployed across asset classes.

And thanks in part to the Biden Administration’s most recent round of stimulus, certain sectors of the economy—including retail—are picking up. C&W’s analysis of the most recent economic data on retail sales and job growth shows that March was one of the strongest months on record, and households have a record amount of dry powder on hand heading into the summer months, with an estimated $2.6 trillion in COVID-era savings ready to be unleashed on the economy.

The labor markets are responding and have begun what C&W calls a “second acceleration,” which analysts expect to continue as lower wage workers continue to reap the benefits of the American Rescue Plan. The US economy is predicted to add 7 to 7.5 million net new jobs over the next two years, which would position 2021 and 2022 among the strongest two-year period on record. Total nonfarm employment is expected to hit pre-pandemic levels by the end of next year, with office-using and retail employment forecast to hit pre-pandemic levels by the end of this year. (Hospitality and leisure employment, however, won’t hit that watermark until 2029.

But on the flip side, the administration’s proposed $3 trillion infrastructure bill and the forthcoming American Family Plan will introduce uncertainty into long-term outlooks, especially since the legislation will be paid for through changes to federal tax policy.  Indeed, last week the administration unveiled several tax proposals that will have an impact on commercial real estate. Meanwhile concerns over inflationary pressures and sovereign debt could also pressure interest rates, and the federal deficit and debt are approaching record territory, C&W analysts say.

“Although not commonly viewed as a near-term problem, if the debt situation is not addressed post-pandemic, markets may begin to worry about the government’s ability to pay its debt, which could affect interest rates, CRE liquidity, and pricing,” the report notes.

On the vaccine front, Biden set an initial goal to deploy 100 million vaccinations in his first 100 days—a goal he reached within 50. Notably, the US is expected to reach her immunity by mid-summer, which will allow the struggling office, retail, and hotel sectors to recover more steadily. On the whole, C&W predicts a more aggressive rollout of vaccinations will boost economic growth and what it calls “face-to-face commerce” which will lift CRE, allowing businesses to reopen and reach higher occupancy levels sooner. This in turn will lift consumer confidence.