CapRock Partners recently sold this property in Las Vegas.

While every asset class has exposure to the economic impacts of the pandemic, CapRock Partners is cautiously optimistic about the industrial market. In fact, in this current crisis, the firm, which focuses on Fortune 500 tenants and middle-market product, believed that industrial is going to be the most resilient asset class.

“Right now, we are cautiously optimistic,” Jon Pharris, president of CapRock Partners, tells “We believe that industrial is going to be the most resilient real asset class amongst the major groups. Industrial typically has longer-term leases that can ride through changes in the economy, and most of the time, industrial users larger than 100,000 square feet have decent balance sheets and often times can withstand economic shocks, depending on the severity of those economic shocks.”

E-commerce is going to remain a major driver of activity. Under the current social distancing rules, online shopping is the only way that many are able to shop. “We think that e-commerce is only going to further support industrial buildings, and in the midst of this pandemic, we are continuing to see leases signed,” says Pharris. “We are also seeing requests from companies that need more space. The new requests that we are seeing today that are new are urgent, and there is a higher probability that those deals will get done.”

This could also turn into a cultural shift that will benefit industrial in the long-term. “This is a structural change in the behavior of companies and the behavior of consumers. That is another reason why we believe that industrial will be stronger in the future,” says Pharris. “On the consumer side, with malls and retail shut down, e-commerce is the only alternative for shopping. The penetration of e-commerce is at an all-time high, and I think that is going to accelerate. Once people get used to shopping online, they typically don’t go back to brick and mortar.”

For companies, however, this will also mean changes—but that will likely result in increased storage needs. “Companies have been focused on just-in-time delivery to keep costs low,” says Pharris. “We think that is going to shift from just-in-time to a resiliency of supply chain. Once this passes, we think that companies are going to want to have more space and more inventory to withstand unexpected black swan events. A 5% increase in storage needs will create 500 million to 700 million square feet of more demand.”

It isn’t all good news. While industrial projects greater than 100,000 square feet will likely be secure, smaller industrial could struggle. “We think there could be stress on smaller-scale projects and non-institutionally owned projects with $25 million in value or less,” says Pharris. “Those properties generally have less sophisticated tenants and a different lending profile. Often the owners of those assets don’t have contingency plans and sometimes have less resiliency.”