Recent news on commercial real estate valuations reflect growing confidence that the sector will start to recover in 2021, said Nareit Senior Economist Calvin Schnure.
Speaking Dec. 7 on the REIT Report, Schnure noted that valuations appear to be more stable than they appeared a few months ago, when the sales prices of properties that were being sold showed a big discount. Volumes at that time were light, though. “As we get a better look at the market, the valuations reflect a bit more confidence that the real estate markets will recover next year,” Schnure said.
Overall, Schnure noted that real estate is holding up quite well in the current environment, with rent collections recovering as businesses open up, “but obviously there are still strains.”
Turning to the broader economy, Schnure noted that while it appears to be slowing, “we’re not at risk of a stall.”
Job growth slowed in November to an increase of 245,000, which is less than half the gain of recent months, while total nonfarm employment is still about 10 million below pre-pandemic levels, Schnure pointed out. At the current rate, it would take 3-1/2 years to recover, “so the fears are justified,” he said.
Schnure also highlighted the decline in the unemployment rate from 6.9% in October to 6.7% in November— due entirely to people dropping out of the labor force.
While Schnure expressed concern for the months ahead until new COVID-19 vaccines are widely available, he expressed optimism that job growth will pick up again once people begin to go out again for travel, entertainment, and shopping.
Meanwhile, Schnure stressed the need for another round of fiscal stimulus measures to support the recovery, given that many existing programs are about to expire.