NAIOP January Coronavirus Impacts Survey: Light at the End of the Tunnel

WASHINGTON, D.C. –  Respondents to a NAIOP tracking survey of the pandemic’s impact on commercial real estate indicate improving rent collection rates, increased industrial investment activity, and a more positive outlook for employment in their firms. Fewer respondents now expect the pandemic will continue to significantly affect their business operations 12 months from now.

“We are encouraged that there is more deal activity in the industrial and retail sectors than there had been in September,” said NAIOP President and CEO Thomas J. Bisacquino. “Lower rates of requests for rent relief across multiple sectors may also indicate that we are on a path to recovery, though we do anticipate that it will be slow.”

The survey was completed by 228 NAIOP members between January 19 and 22. Respondents represent a range of professions, including developers, building owners, building managers, brokers, lenders and investors.

Strong growth in industrial deal activity and modest growth in retail acquisitions suggest an overall increase in commercial real estate investment activity. Deal activity in both the office and multifamily sectors remains more robust than it had been before September.

Rent collection rates improved across most sectors

87% of respondents report that 90% or more of their office tenants have paid rents in full and on time, marking the highest reported collection rates for office properties since the survey was first conducted last April. Improved office and retail collection rates suggest improved business conditions for office and retail tenants. Many tenants have likely benefited directly or indirectly from the recent renewal of federal relief programs, such as Paycheck Protection Program loans to small businesses and direct payments to taxpayers.

Respondents also report that fewer tenants had requested rent relief in January, with reductions in these requests reported across all property types. Office properties experienced the sharpest decline in relief requests, with only 19.7% of respondents reporting that more than 10% of office tenants had requested relief.

Development Projects Remain Delayed

Developers report that the pandemic continues to affect ongoing projects in several ways. More than 60% report added delays in obtaining permits and entitlements due to the coronavirus, just under half (49.4%) report a significant decline in leasing activity, and a large minority of respondents (40.2%) report delays or shortages in construction supplies. On the other hand, government mandated halts to construction projects are now very rare, reported by only 5.8% of respondents.