What will 2021 hold for the business community and our clients? Based on what we are seeing and hearing in our industry, here are Lanak & Hanna’s predictions for 2021.
The hangover from the COVID-19 Pandemic will likely drag down First Quarter prospects, even with the onset of a new administration in Washington and an eagerly anticipated COVID-19 vaccine. We look for measured, key sector growth by the Second Quarter. A slow jog, not a quick sprint!
- On the public works contracting side, President-elect Biden’s campaign called for $2 trillion of investments over four years in the country’s infrastructure, transportation, and auto industries, with a focus on union labor. Key targeted sectors include roads, bridges, water systems, electricity grids and an ambitious plan to upgrade four million buildings, improve residential construction and spend $100 billion to modernize aging schools. Priority will be given to environmentally friendly and sustainable construction: solar and wind, not coal and gasoline.
Will a potentially divided Congress fund the President’s endeavors? If so, union and government contractors will benefit the most, as will woman-owned, minority-owned, and other disadvantaged small business enterprises.
- Some form of COVID-19 government stimulus is likely by early 2021, although its final shape and form remains unknown, partly due to partisan rancor. Any sizeable government-backed stimulus program will no doubt come post-inauguration and its effects would not be felt until well into the Second Quarter. California Governor Gavin Newsom has already implemented Statewide measures, including further extensions on State tax filing and a $500 million grant program for small business.
- In the travel/hospitality arena, look for significant rebounds in leisure travel, post-vaccination, as Americans tire of being cooped up at home and look for significant changes in scenery. Spring break trips will be booking soon and summer vacation reservations are not far off. For those looking to travel later in 2021, book that hotel room soon, before rates increase.
We anticipate business travel will remain relatively flat as companies realize productivity goals through online and virtual meetings. The day of the large company travel budget may be over.
- There is some speculation that commercial real estate will grow bullish as business returns. We are not convinced. Conventional wisdom better dictates that the commercial real estate market will remain flat for some time as vacant office space remains abundant and plentiful. Businesses we know are leery of signing sizeable, long-term leases for large office space which has become increasingly obsolete in a Zoom world.
- The residential housing market never cooled, even during the height of the Pandemic, buoyed largely by the Donald Trump stock market. Particularly telling in Southern California where Pandemic unemployment barely made a dent in residential housing prices. We do not see this trend changing with the sunset of COVID-19. To the contrary, this environment creates unique opportunities for developers continuing to seize on historically low interest rates and renewed optimism in our country as we exit a gloomy Pandemic period.
We anticipate more sizeable and creative real estate deals being negotiated in 2021, which may cascade into increased spending on design, engineering, and construction, particularly in Southern California. Potentially thawing international relations with countries such as China may open the door to increased capital investment and financing of larger real estate transactions. We are already beginning to see such deals in their infancy.
In a nutshell, recovery will take time. The indicators are positive and the forward trajectory is there. Patience is needed in order to make a full recovery. A jog, not a sprint!
Happy Holidays from all of us at Lanak & Hanna, P.C. We wish you and your family a happy, healthy, and safe holiday season and look forward a prosperous 2021!
The information contained in this Newsletter has been prepared by Lanak & Hanna, P.C. for educational and informational purposes only. It does not constitute legal advice, nor does it substitute for legal advice.