More than 110,000 restaurants have closed permanently or long-term across the country as the industry grapples with the devastating impact of the COVID-19 pandemic.
More than one out of every six restaurants in the U.S. is already gone, and the National Restaurant Association is warning that there will be more carnage in the months ahead because the industry is in “economic freefall.”
“The restaurant industry simply cannot wait for relief any longer,” Sean Kennedy, executive vice president of public affairs at the association, said in a letter to Congress. “What these findings make clear is that more than 500,000 restaurants of every business type — franchise, chain and independent — are in an economic free fall.”
This is what an economic depression looks like.
With tens of thousands of restaurants sitting empty, and with tens of thousands of others not paying rent, the stage has been set for a commercial real estate disaster of unprecedented scope and size. The coming commercial real estate crisis is going to make the subprime mortgage meltdown of 2008 and 2009 look like a Sunday picnic.
And the longer this pandemic stretches on, the larger the losses will ultimately become. For residential real estate, the big story is that hordes of Americans are fleeing both coasts and are moving to smaller communities in the middle of the country.
So even as housing prices drop substantially in major cities on the east coast and the west coast, they are rising rapidly in cities such as Pittsburgh, Boise and Austin.
“Smaller metropolitan markets like Pittsburgh, Cleveland, Cincinnati, Indianapolis, Kansas City, Boise, Idaho, Austin, Texas, and Memphis, Tennessee are seeing some of the strongest price gains in the nation now, according to the Federal Housing Finance Agency. Prices in those cities are now at least 10% higher than with a year earlier.”
2020 may have been a personal financial disaster for 55 percent of all Americans, but thanks to the hyperinflation in the stock market the wealthy have more money to throw at high end real estate than ever before.
Unfortunately, however, all of the wild money printing is not going to be able to prevent the coming crash in commercial real estate.
No matter how much money they have, many Americans are simply too afraid of COVID to eat out right now, and that will remain the case for the foreseeable future. And we are going to continue to see more Americans migrate away from the large cities on both coasts, and more businesses in those core urban areas will continue to fail. As the commercial real estate crash unfolds, a lot of financial institutions simply won’t be able to make it without government help.
Every dollar the federal government borrows and spends just makes the long term problem even worse. All of the dominoes are starting to fall, and we are still in the very early chapters of this horrifying economic collapse.