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Are Investors in for a Second Round of Closures? Here's What It Could Mean


[Updated: Jan 19, 2021 ] Jan 19, 2021 by Liz Brumer
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As the coronavirus outbreak enters a second big wave across the globe, concern is growing over a second round of closures in the USA. The Trump administration was adamantly opposed to another round of closures, but the newly appointed Biden administration wants to aggressively combat the continued spread of COVID-19, meaning there's a good chance that new restrictions could be on the horizon across the country and have significant implications for real estate investors.

What we know

Right now, the United States is experiencing a record-high number of confirmed COVID-19 cases with over 24 million positive cases and just under 400,000 deaths at the time of this writing. Weather, holiday gatherings, and the necessity for the economy to continue operating have all increased the speed at which the virus is spreading.

Biden's website outlines his plan for reopening the economy, including injecting 100 million doses of the recently released Pfzier vaccination in the first 100 days of office, allocating funds to hiring 100,000 healthcare workers for local and national contact tracing, and increasing rapid testing and testing facilities while employing stricter travel policies, including blocking Trump's recent loosening of travel restrictions for incoming travelers from certain European and Asian countries.

This comes shortly after the Centers for Disease Control (CDC) stated they would require a negative COVID-19 test before departure from any air traveler arriving in the United States from another country starting January 26, 2021.

Additionally, Biden plans to reopen schools and require new safety protocols for employers to bring employees back to the workplace, including "social distancing, improved ventilation, and other workplace design measures, adequate personal protective equipment, targeted sanitation procedures, as well as training, notification and communication requirements for handling cases at work."

How things could play out for real estate investors

Biden's plan would have some major impacts for real estate investors, but both cost and supply will be huge factors in its success. Not only does he need several more rounds of vaccines to be produced at rapid speed, but he'll need approval from both the House and Senate to receive the necessary funding to implement a plan of this size.

Requiring a negative COVID-19 test in order to travel may make people feel more comfortable traveling by air and thus more likely to travel and spend their tourism dollars in the United States, but it could also do the opposite. A lack of access to rapid testing in addition to the cost of testing may deter travelers from entering the USA, which would only push the already hard-hit travel industry even harder.

Enacting new protocols for workplaces to reopen puts tremendous cost and pressure on businesses owners and office, hotel, and retail landlords who are already suffering from decreased rents, high occupancy rates, and tenant deferrals. In addition to new equipment or distancing and cleaning measures, Biden's plan will hold employers liable for potential spread of the virus in the workplace, placing a whole new level of liability on employers and landlords.

There's discussion of some governmental assistance programs for those who need assistance to implement new protocols, but this will take time, and investors and business owners could be met with limited supply for large equipment improvements because of increased demand.

In summary

A number of other countries, including the U.K., Denmark, and Germany, have imposed a new round of lockdowns. While Biden has not directly stated an intention to impose the same, there is a chance new restrictions, including a second round of closures, could be put in place. At this point, no one knows exactly how it will play out. It's more likely that local cities or states will impose their own restrictions rather than closures on a national level.

The rapid disbursement of the vaccine would surely increase the speed of recovery for our economy, but this will take time. Investors should prepare for another several months of reduced economic activity, possible new restrictions, and a longer period for recovery than many may have hoped for.

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