At this writing, Congress is expected today to approve and send to the president a stimulus and relief package second only in size to the $2 trillion CARES Act that was approved in March after the pandemic first put its foot down on the American economy. Assuming it gets signed and put into action, the bill calls for $600 payments to be sent to individuals beginning in the next couple of weeks, as well as a $300 boost to unemployment benefits to run through the middle of March.
The cash payments to everyone will be based on income, like last time, but are half the size of the $1,200 payments this past spring. The unemployment boost, meanwhile, comes at a crucial point: extended benefits for an estimated 12 million people expire this month, CNN says.
The Paycheck Protection Program also would be revived in this package, and this time it adds $12 billion specifically for minority-owned and very small businesses, and, according to reports, it adds a new twist this time around: $15 billion for live venues, independent movie theaters, cultural institutions, other nonprofits, and local newspapers and TV and radio broadcasters.
So, what does this $900 billion deal, assuming it gets put into place, mean for commercial real estate in America?
Everything and nothing.
More cash into households means more cash out
The everything part is, of course, the fact that it gives a shred of hope and some ability to pay for households behind on their rent and house payments, many of which face eviction when moratoriums expire.
That means much-needed income flowing back to the owners of that rented property, many of them small operators who depend on that cash for their own daily bread.
That cash, while it will arrive after the holidays, also means more spending at retail businesses, providing some much-needed income to those establishments, many of which have been brutalized by the pandemic.
Meanwhile, revival of the PPP, which, along with a companion but much smaller disaster loan program, doled out more than $700 billion earlier this year, can make a huge difference for businesses trying to keep their staff paid and their businesses alive.
But here’s where the nothing part comes in.
But nothing happens unless everything goes right
For starters, while it’s encouraging the PPP program is being ramped up again, that cash needs to get to more businesses. The New York Times [subscription required] reported earlier this month that 1% of the 5.2 million borrowers got more than a quarter of the $523 billion handed out as forgivable loans by the SBA through the PPP. Perhaps the emphasis this time on small, minority, and other small, independent businesses and nonprofits will help there.
And then, unemployment is rising again. After recovering from the cataclysmic rise in initial jobless claims in the spring, applications surged to their highest level in three months in the week ending Dec. 12, Bloomberg reports, pointing to a faltering labor market recovery amid growing new restrictions on businesses as COVID-19 runs increasingly rampant.
All this has to work out right for the economy to recover, boosting along with it the bottom lines for millions of investors in real estate investment trusts (REITs) and in commercial property itself, which includes not just retail but office space, too, upon which much hope rests for recovery when people can work around each other again.
The Millionacres bottom line
And that brings us to the final nothing.
Whether that combination of stimulus cash and continued unemployment benefits is enough to make a significant difference remains to be seen, but ultimately, unless the virus is contained and the pandemic defeated, there will be no sustained economic recovery.
That’s the bottom line for the future of CRE investment and pretty much everything else.
Fiscal stimulus is not a vaccine. That can only be injected into people.