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Navigating Uncertainty: The Impact of Three Key Events on Commercial Real Estate in October 2023

Posted by Jerad Giottonini on September 27, 2023

As we approach October 2023, the commercial real estate market faces an unprecedented confluence of events that could significantly impact its trajectory. In this article, we will delve into the looming government shutdown, the resumption of student loan repayments, and the expiration of federal emergency childcare funding, exploring how these events might affect the industry and strategies for brokers to navigate this uncertain terrain.

The Looming Government Shutdown:

One of the most pressing concerns on the horizon is the looming government shutdown. While the specifics of the situation can change rapidly, a government shutdown can have far-reaching consequences. Federal agencies play a substantial role in real estate, from regulation to funding for infrastructure projects. A shutdown could lead to delays in permitting processes, government-backed financing (e.g. SBA loans), and impact the confidence of already beleaguered investors and developers. Additionally, furloughed government employees and contractors are likely to curb spending and retail and hotels around shuttered national parks will be significantly impacted.

Resumption of Student Loan Repayments:

The resumption of student loan repayments after a moratorium can affect the financial health of many individuals, including investors and tenants. If borrowers suddenly face increased financial obligations, it might lead to a decrease in disposable income, potentially impacting consumer spending, and, consequently, the demand for commercial properties such as retail spaces.

Expiration of Federal Emergency Childcare Funding:

The expiration of federal emergency childcare funding could have a direct impact on the workforce, posing a potential concern for the Fed’s ongoing battle against inflation. Childcare costs are expected to increase in many areas and parents will grapple with the increased costs or potentially cutting back on hours or leaving the workforce entirely. With the unemployment rate near historic lows–3.8% as of August 2023–a further decline in unemployment could create stronger than desired wage growth gains, driving inflation higher. Parents juggling work and childcare responsibilities might need more flexibility at a time when many employers are expecting a return to the office. This is likely to be an additional drag on office space demand.

Mountain West brokers are well informed and understand the challenges facing the commercial real estate sector and are ready to adapt to changing market dynamics and prepared to offer creative solutions to clients.

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