Although business conditions have improved for commercial real estate, according to the most recent COVID-19 impact survey conducted by NAIOP, 86.6% of developers now report delays or shortages in construction supplies — an all-time high since the survey began in April 2020. This suggests that supply chain disruptions may outlast other effects of the pandemic, increasing construction costs and slowing new development.
The percentage of respondents reporting some type of deal activity has more than doubled for office and retail properties over the last year. It has also increased substantially for industrial (92.2% vs. 71.2% in June 2020) and multifamily (76% vs. 58.6%) properties.
The share of respondents reporting a decline in leasing for current development projects has dropped by more than half, but shortages of construction supplies and workers are both more acute now than a year ago. Although local governments have had more than a year to adapt to the pandemic, the share of respondents reporting delays in permitting or entitlements due to COVID-19 has remained unchanged since June 2020, with two-thirds of respondents reporting these delays.
For the first time since NAIOP began the coronavirus impacts survey, most respondents reported witnessing some type of retail acquisition or development activity. Nearly a third (31.3%) reported new retail development, and 39.1% reported acquisitions of existing retail buildings, marking a sharp increase in both measures since the January survey. Seventy percent of respondents reported that 90% or more of their retail tenants had paid their rent in full and on time by June 15, the first time most respondents have reported this rate of on-time collection for retail properties since the survey began in April 2020.
The survey was completed by 239 NAIOP members between June 16 and 21, 2021. Respondents represent a range of professions, including developers, building owners, building managers, brokers, lenders and investors.
“The materials and supply chain issues are lagging effects of the pandemic, and they are affecting every industry,” said Thomas J. Bisacquino, president and CEO of NAIOP. “ “While the pandemic’s impact was deep, there’s a sense of optimism among NAIOP members, with deal activity rising and an increase in people returning to offices, restaurants and retailers.”
In June, NAIOP conducted its eighth survey of its U.S. members on the impacts of COVID-19. Since April 2020, the association has examined the pandemic’s effects on commercial real estate and how firms have responded.