How the Continued Government Shutdown Could Affect Commercial Real Estate?

Posted on January 23, 2019

As it continues with no light at the end of the tunnel, the 2019 government shutdown is the longest in U.S. history as of January 12th. The partial federal government shutdown began on December 22, 2018 and continues to have an impact on many. Nearly 800,000 federal employees have been either furloughed from their jobs or are working without immediate pay. Among the various agencies directly affected by the shutdown, the FDIC and Federal Reserve are two agencies that remain open and operational during this time, allowing some sense of relief for those in the commercial real estate industry.

However, if the shutdown continues, markets may begin to see a major effect due to the reduced consumer spending in areas with densely populated federal employees. One of the growing concerns with the lengthy shutdown is the impact it will have on economic growth, along with investor trust. Brokers should be weary to examine the implications on investor confidence in the general economy and the impact it may have on interest rates and investment strategies, even after the shutdown ceases.

For the most part, we have not witnessed any major setbacks in consumers and businesses holding off on major purchases. However, in the meantime there are many scenarios we should be mindful of in the event the shutdown continues:

  • Multifamily projects may be experiencing delays in approval because the U.S. Department of Housing and Urban Development is unable to endorse any new loans for its multifamily program.
  • Agencies like the U.S. Census Department are currently under furlough, making the historical data difficult to come by. For example, in situations where analyzing data to make purchase decisions based on the way different markets are performing is near impossible due to the shutdown.
  • During this time The Small Business Administration is inactive, which means that small businesses and startups searching for new office or retail space will have a difficult time receiving the necessary funding.

Many of the real-time impact measurements from the shutdown may not be clearly visible until after the shutdown is over. But with the hopes of a resolution coming sooner rather than later, a number of experts are not expecting any major deficits. But with that being said, it’s in your best interest to keep this in the back of your mind in the event the shutdown persists.