January 4, 2019
Commercial Real Estate Braces for Government Shutdown
The government shutdown is now in full swing, looking to become the longest shutdown in U.S. history. The partial shutdown is impacting some 800,000 employees who oversee multifamily housing loans and office sector financing, among other areas, according to the New York Times. While essential jobs, such as law enforcement and mail delivery, are still open, the shutdown has affected these departments: Homeland Security, Justice, State Dept., Treasury Dept., the EPA, and NASA.
Plus, workers will have fewer dollars to spend in restaurants and other retail outlets, impacting those commercial real estate sectors. According to this Bisnow story, here’s a quick look at how the commercial real estate industry is seeing the impact:
Multifamily Housing: Enforcement and Oversight Slows
The Department of Housing and Urban Development is working with a limited staff, resulting in slower loan processing. This impacts new multifamily and related housing projects and enforcement of federal housing regulations. According to Bisnow, just 343 of HUD’s nearly 7,500 employees were expected to work full time during the shutdown. The National Association of Realtors’ Chief Economist Lawrence Yun says, “Right now there’s a housing shortage for owner occupancy and rental, so if there’s a delay in approving some of the multifamily projects.”
The government shutdown is impacting:
- Fair Housing and Equal Opportunity Office employees — just a fraction of whom were projected to work full time during a shutdown.
- Internal Revenue Service forms processing, including some for housing loans. These have been suspended during the shutdown, according to NAR.
Office Sector: Loans are an Issue
Small businesses looking for loans will have a more difficult time because of the shutdown. This could affect the tech sector, startups and small retail businesses. The Small Business Administration said it will remain inactive due to a lack of funding, impacting loan processing and other functions.
Retail Spending to Slow but Restaurant Discounts Offered
Restaurant and retail store traffic is expected to slow, particularly in Washington, DC and other areas with large concentrations of federal workers. This trickle down to the local economy could be a significant strain for small businesses. According to the Washingtonian, many restaurants are adding special deals to help federal workers — and keep their foot traffic flowing during the government shutdown.