Job Markets, Business Reopenings Signal Coming Turnaround for CRE, REITs

Labor markets are showing signs of reaching a turning point, with a slowing of initial claims for unemployment insurance to less than one-third the pace six weeks ago, and a drop in the number people receiving unemployment benefits by 3.9 million as the government’s Paycheck Protection Program (PPP) helps fund employers to keep workers on the payrolls.

Other macroeconomic news continues to underscore the severity of the economic crisis caused by the pandemic, however, including the 17.2% decline in orders for durable goods in April and the downward-revised 5.0% decline (annualized) in GDP in the first quarter.

States are beginning to ease restrictions on activities and businesses. The gradual reopening of the economy in the weeks and months ahead will restart the cash flows for many businesses small and large. This resumption of business activity will help ease some of the current pressures on commercial real estate markets as tenants generate the sales needed to meet rent payments, as well as payrolls, suppliers, loans and other obligations.Challenges remain to the outlook, but CRE markets are likely to benefit from the gradual resumption of business activity.

The Nareit research team has been actively engaged with the media tracking how these economic developments impact the outlook for commercial real estate and REITs. I recently spoke with Akiko Fujita on Yahoo Finance TV about labor markets and the economic outlook; with Bloomberg chief Washington correspondent Kevin Cirilli about the latest jobless claims figures, durable goods and GDP; and with Nicole Petallides at TD Ameritrade Network.

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The Market Commentary blog on reit.com presents analysis of the macro- and micro-economic fundamentals impacting the REIT and commercial real estate industry. The Nareit economics team offers their commentary on the state of the market, the outlook for commercial real estate and breaking macroeconomic news. The opinions set forth here are solely those of its author(s), and do not necessarily reflect the views of the Nareit or its membership. For more, see our Terms of Use.