U.S. Economy Slowly Recovering from COVID-19 Impact, Says AEW Researcher

As pandemic-driven restrictions steadily ease across the country, all 50 states have now entered some form of gradual economic reopening. Customers are returning to retailers and office workers returning to their cubicles, but businesses are still struggling to recover from the impacts of COVID-19.

In a webinar titled “The Future of Real Estate,” Michael Acton, head of research at AEW Capital Management, addressed key reopening data, demographic trends and his real estate outlook for the remainder of 2020 on into 2021. Natixis Investment Managers, a French-based global asset management company, hosted the event on Thursday, June 11. AEW is one of the largest real estate investment managers of all property types in the world, and both companies are headquartered in Boston.

One piece of surprisingly good news came early this month when the Department of Labor reported that the U.S. economy added 2.5 million jobs in May. On the downside, slightly over 1.5 million Americans filed for unemployment for the week ending June 6. Approximately 44 million Americans — about one-quarter of the nation’s workforce — have filed for unemployment benefits since mid-March when huge swaths of the American economy went into a lockdown mode to prevent the spread of COVID-19, according to Acton.

“As dramatically bad as the data has been the last few weeks and months, we’ll probably have quite a few observations of data that will be equally spectacular to the upside going forward,” said Acton. “That said, these are numbers that we never thought we would see, and it’s a mistake to believe that we will have a sharp recovery.”

Restaurants and service industry businesses across the country have been forced to lay off their entire staffs or close permanently, unable to survive several months without sustainable income. Some restaurants were able to continue serving food through delivery and in-store or curbside pickup, and many are now able to serve customers on patios or even indoors in select states.

Acton said that returning customers, particularly in the southern, southwestern and New England states, have provided a welcome relief to restaurant tenants, and that increased customers are a good sign of consumer confidence. Acton cited data from reservation service Open Table, which indicated an increase in table reservation activity in May and early June compared with nearly flat activity in April and previous months.

“Restaurants capture a comfort level of individuals and families,” said Acton. “If you’re going to go out with your family to sit in a restaurant and have a meal, that’s a very social and personal experience. The fact that people are returning to this practice shows an improvement in sentiment and confidence to interact with the economy again.”

Social Distancing in the Office

After working from home for a few months to minimize the spread of COVID-19, office workers have now returned to their cubicles in much of the country. Moving forward, Acton predicts that many companies will now have to evaluate how much office space per worker is optimal amid social distancing requirements in place.

“We have proven that remote work is possible during this time,” said Acton. “It’s actually amazing how many companies were able to continue work without missing a beat. We are very lucky this happened now, when we have technology like Zoom, and delivery systems like Amazon that make this possible. If this outbreak had happened just five years ago, it may have been a different story.”

Companies had been gradually downsizing the amount of office space per worker in the years leading up the pandemic, but they can no longer do that while maintaining social distance. Some companies may elect to a staggered schedule with staff members working in the office on alternating days, while others may seek wider space with room for all of their employees at once.

“A lot of workers are going to use and enjoy this flexibility to be able to work from home, but I don’t think that most workers are going to want to work from home every day,” said Acton. “Workers will likely feel comfortable at work itself, but perhaps not their method of getting to work, since many office workers in cities use public transportation. Humans are very social and we’re going to want to continue to interact with each other.”

— Alex Patton

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