In the third NAIOP survey tracking the commercial real estate industry’s response to the COVID crisis, the industrial real estate sector showed significant gains in new redevelopment/redevelopment, building acquisitions and deal activity.
Industrial real estate remains the strongest sector (compared to office, multifamily and retail) for reported activity, with the share of respondents observing new industrial development more than doubling since April (from 18.5% to 43.2%) and 70.7% of respondents witnessing industrial building acquisitions.
“The pandemic has fundamentally changed the ways that we work, shop and live. For e-commerce, this means a greater dependence on the delivery of products and higher demand for the industrial/warehouse sector,” said Thomas J. Bisacquino, president and CEO of NAIOP.
June survey results also revealed an uptick in optimism about the duration of the outbreak’s effects. In the May survey, NAIOP observed that there had been an increase in the proportion of respondents who expected that the outbreak would significantly affect their business operations for more than a year. That trend did not continue into June. Instead, a smaller share of respondents expects these effects to last more than a year, although that expectation remains more common than it was in April.
Across all three surveys, a majority of respondents reported that 90% or more of office, industrial and multifamily tenants paid their rent in full and on time.
Most of the outbreak’s effects on current development projects continue to soften. Two-thirds of respondents (66.1%) continue to report delays in permitting or entitlements since the outbreak, but other measures continue to improve. Most notably, fewer respondents report a decline in leasing (49.4% vs. 57.2%) or delays in financing (16.1% vs. 23.3%) than they did in May. Local government restrictions on construction have also eased, with less than one-quarter of respondents reporting a mandatory halt, compared with about one-third of respondents reporting mandated halts in May.
This is the third survey conducted during the COVID crisis. More than 350 NAIOP members completed the survey, which was fielded from June 15-17, 2020. Respondents represent a range of professions, including developers, building owners, building managers, brokers, lenders and investors. The first survey was completed by 446 NAIOP members from April 20-22, 2020. The second survey was completed by 461 NAIOP members from May 18-20, 2020.