Archives for January 2021

In this Dec. 17, 2020, file photo people check in at a food bank held at Los Angeles Boys & Girls Club in the Lincoln Heights neighborhood of Los Angeles. California’s unemployment rate edged up nearly 1 percentage point last month as the state shed more than 52,000 jobs led by the pandemic-hobbled restaurant and lodging industries, the state’s beleaguered Employment Development Department reported Friday, Jan. 22, 2021. (AP Photo/Jae C. Hong,File)
WASHINGTON — Stuck in the grip of a viral pandemic, the U.S. economy grew at a 4% annual rate in the final three months of 2020 and shrank last year by the largest amount in 74 years.
For 2020 as a whole, a year when the coronavirus inflicted the worst economic freeze since the end of World War II, the economy contracted 3.5% and clouded the outlook for the coming year. The economic damage followed the eruption of the pandemic 10 months ago and the deep recession it triggered, with tens of millions of Americans left jobless.
Thursday’s report from the government estimated that the nation’s gross domestic product — its total output of goods and services — slowed sharply in the October-December quarter from a record 33.4% surge in the July-September quarter. That gain had followed a record-shattering 31.4% annual plunge in the April-June quarter when the economy sank into a free-fall.
The outlook for 2021 remains hazy. Economists warn that a sustained recovery won’t likely take hold until vaccines are distributed and administered nationwide and government-enacted rescue aid spreads through the economy — a process likely to take months. In the meantime, millions of Americans continue to struggle.
On Thursday, for example, the government reported that while applications for unemployment benefits declined last week, they remained at a historically high 847,000, evidence that companies keep cutting jobs as the pandemic continues to rage. Before the virus erupted in the United States in March, weekly applications for jobless aid had never topped 700,000, even during the Great Recession.
Even as the economy shrank last year, the stock market managed to rise sharply, with the S&P 500 index gaining 16%. The disparity between the two reflected a time-tested adage: The stock market is a forward-looking indicator, with investors focused on prospects for future corporate profits and economic health rather than on the current state of the economy. So even as the economy was sinking last year, investors looked ahead to hopes for vaccines and government aid and to solid company profits, especially among tech companies, which drove last year’s gains.
The pandemic’s blow to the economy early last spring ended the longest U.S. economic expansion on record — nearly 11 years. The damage from the virus caused GDP to contract at a 5% annual rate in last year’s January-March quarter. Since then, thousands of businesses have closed, nearly 10 million people remain out of work and more than 400,000 Americans have died from the virus.
The government’s report Thursday was its first of three estimates of growth last quarter; the figure will be revised twice in the coming weeks. The report showed that consumer spending, which accounts for about 70% of the economy, slowed sharply last quarter to a 2.5% annual gain from a 41% surge in the July-September quarter.
Last quarter’s economy was instead driven in part by business investment and housing, which has been a star performer during the past year, reflecting record-low mortgage rates and a demand for more household space. Housing grew at a sizzling 33.5% annual rate, business investment at a 13.8% rate. Government spending, though, shrank at a 1.2% rate last quarter. State and local governments have started to resort to layoffs in response to falling tax revenue.
The estimated drop in GDP for 2020 was the first such decline since a 2.5% fall in 2009, during the recession that followed the 2008 financial crisis. That was the deepest annual setback since the economy shrank 11.6% in 1946 when the economy was demobilizing after World War II.
The GDP report showed that former President Donald Trump ended his presidency with GDP averaging annual gains of 1% during his four years. That was lower than the 1.6% annual GDP gains during the Obama administration, a period that also included a recession.
In the coming months, as vaccines become widely distributed and administered, growth is expected to revive. But until then, many Americans will struggle as consumers and businesses hunker down and hold back on spending even though the economy will likely keep growing. Gregory Daco, chief economist at Oxford Economics, said he expects growth to weaken in the current quarter to a roughly 2% annual rate.
But Daco foresees a brightening outlook for the rest of this year. His view assumes a widespread use of vaccines, increased government aid from Congress’ approval of at least part of President Joe Biden’s $1.9 trillion relief package and pent-up spending from a savings buildup among higher-income families during the pandemic. A $900 billion rescue aid package that the government enacted late last year is also providing some support.
“The vaccine rollout is essential,” Daco said. “Without an improving health situation, we are not going to get any improvement in the economic situation.”
Daco said he thinks an economic rebound will produce annual growth this year of 5%. Earlier this week, the International Monetary Fund forecast that the U.S. economy will grow 5.1% this year and 2.5% in 2022.
On Wednesday, the Federal Reserve took note of the economic threats. It kept its benchmark interest rate at a record low near zero and stressed that it would keep pursuing its low-rate policies until a recovery is well underway. The Fed acknowledged that the economy has faltered in recent months, with hiring weakening especially in industries affected by the raging pandemic, notably restaurants, bars, hotels and others involved in face-to-face public contact.
Hiring in the United States has slowed for six straight months, and employers shed jobs in December for the first time since April. The job market has sputtered as the pandemic and colder weather have discouraged Americans from traveling, shopping, dining out or visiting entertainment venues. Retail sales have declined for three straight months.
Mark Zandi, chief economist at Moody’s Analytics, predicts that about 5 million lost U.S. jobs will never return, forcing the unemployed in such industries as restaurants and bars to find work in other sectors.
And many economists warn that without further government financial support, the economy risks succumbing to another recession. They note that much of the aid for individuals from the $900 billion package that was enacted late last year is set to expire in mid-March.
Source: ” US Economy Shrank 3.5% in 2020 After Growing 4% Last Quarter“

The 100 largest office lease transactions last year totaled 29 million square feet, 32% lower than in 2019.

Early data shows that office users favored smaller footprints in 2020. The trend supports theories that office demand would shrink in response to widespread remote work policies that sprouted during the pandemic.
Last year, the 100 largest office lease transactions totaled 29 million square feet, 32% lower than in 2019, according to research from CBRE. These deals accounted for 19% of total office leasing activity. Lease renewals accounted for 43% of the top lease transactions. This was increase over renewals in 2019, which is likely due to tenants taking a pausing on office leasing decisions during the pandemic. Overall, office leasing decreased 36% last year.
The top 100 office lease deals primarily took place in Manhattan and Seattle, with Manhattan and Washington DC accounting for 40% of the total square footage of office leases. Seattle, Boston, Houston and Atlanta were the other top markets for office leases, accounting for 37% of the top 100 lease deals.
Technology companies and the government and non-profit sector each accounted for 18 of the top 100 leases. Tech leases totaled 6.8 million square feet, while government and non-profit companies accounted for 4.7 million square feet of the top leases. And, technology, life sciences and energy sectors accounted for 84% of total leases in the top leasing markets noted above. While tech was a driver of leasing in 2020, activity was still down more than 50% for the sector last year. All industries saw a drop in leasing activity with the exception of business services, which saw a 7% increase in average lease size.
Whitley Collins, Global President of CBRE Advisory & Transaction Services, anticipates that activity likely will perk up in 2021 as the vaccines roll out and the economy improves, but in the meantime “companies will map out their long-term office strategies with new emphasis on determining the most efficient use of workspace with more employees working flexibly from multiple locations.”
Indeed, most experts anticipate a long-term reduction in office usage due to the pandemic. In December, Upwork’s Future Workforce Pulse report predicted that the number of remote office workers would double over the next five years, increasing to 36 million workers or nearly a quarter of the workforce. Prior to the pandemic, only 12% of the workforce worked remotely. Currently, 56.8% of Americans are working from home, at least part time, and 41% of workers are working from home full time.
Company policies are also changing due to the pandemic. A survey of companies conducted by S&P Global Market Intelligence found that 64% of companies plan to keep remote work policies following the pandemic. As a result, 32% of companies plan to reduce their office footprint as a result—identical to the reduction in office square footage last year, according to the CBRE report. Smaller companies are more likely to keep remote work policies. Companies with fewer than 1,000 employees said that 100% of the workforce would work remotely going forward.
Source: “Office Tenants Are Leasing Much Less Space“

Nonresidential starts are now at their lowest level since 2015

Commercial and multifamily construction starts in the top 20 US metro areas fell to $111.1 billion in 2020, a freefall of about 23% in value, according to Dodge Data & Analytics. More broadly, national starts in those sectors took a 20% tumble to $193.4 billion. The total consists of office buildings, stores, hotels, warehouses, commercial garages, and multifamily housing and does not include institutional building projects.
Among the largest US metros, New York City saw a 25% decline year-over-year but remained the largest market for commercial and multifamily starts at $23.5 billion.  The Washington, D.C., metro suffered an identical decline, with starts at $8.9 billion, followed by Los Angeles, which fell 21% to $7.4 billion.

Nonresidential construction will likely remain in recession this year, after construction spending ended an epic run of expansion last spring.  Total starts fell 10% to $766.3 billion in 2020, and nonresidential starts posted the lowest level since 2015, as GlobeSt previously reported.
“The pandemic is having a significant negative impact on commercial and multifamily construction across the country,” stated Richard Branch, Chief Economist for Dodge Data & Analytics. “While some areas stabilized over the summer, the current wave of the virus has further hindered activity. The recently passed $900 billion stimulus plan will go a long way towards re-energizing the economy.”

Branch predicts that the construction sector will show signs of recovery in 2021, but that it will be a difficult slog. “The effects of the pandemic on the US economy and building markets will be felt for several years,” he says.
Phoenix was the only top 20 metro reporting an increase in commercial and multifamily starts, gaining 32% to $5.3 billion following a 35% gain in 2019. Commercial building starts in the Valley of the Sun increased 20% in 2020, owing mostly to gains in warehouses, hotels, and parking structures. Denver and Kansas City were the sold standouts posting increases among secondary markets (those ranked 11 to 20 in terms of size), which lost a collective 23% as well over the course of the year.
Source: “Nonresidential Construction Likely to Remain in Recession This Year“