With shutdowns leading to a decrease in economic activity, the United States is expected to see one of the largest economic contractions in history, an echo from the great depression, according to Representative Don. Beyer.
The 2 trillion Coronavirus relief package will provide a stimulus to 10% of the U.S. economy and it will, directly and indirectly, benefit the commercial real estate industry. The package is meant to support the economy after COVID-19 hopefully leading to a rebound in real estate, travel, retail, and other business activity affected by shutdowns.
However, the bill really only acts as a floor to prevent economic collapse instead of spurring economic activity. It is unlikely that consumers or businesses will use government money to spend on non-essentials.
According to Oxford Economics, the bill includes tax breaks for corporations up to $232 billion and allows businesses to apply losses from 2018 to 2020 to offset income. In addition, a provision in the relief package allows property owners to write off building improvements while Real Estate investment trusts are excluded.
Is this all enough?
The Relief Package includes $1 Trillion dollars in loans, $350 billion of which are meant for small businesses with fewer than 500 employees through the end of this year. If used for rent, utility, payrolls and interest payments for an eight-week period, the loans will be forgiven, but the amount of forgiveness would be reduced if workers are laid off or have significantly reduced hours.
Without more help, it is hard to see small businesses surviving a prolonged shutdown, we don’t even know yet what life will be life after we manage to flatten the curve. Luckily, the federal government is looking to expand relief for small businesses.
Overall, time will tell how effective the current and future relief packages are for the United States economy.