HAUPPAGUE, NY—A survey of the members of two of Long Island’s leading business organizations show that the COVID-19 pandemic is having a devastating impact on the real estate industry here.
The Association for a Better Long Island and the Long Island Builders Institute issued the survey of their membership to examine the scope of COVID-19’s economic impact in the eastern suburbs of New York City.
A total of 100% of the participants indicated a loss of revenue in the second quarter of 2020, and projecting a decrease in revenue for 2020. ABLI Executive Director Kyle Strober notes the COVID-19 economic impact is obvious, immediate, and fierce. The survey reports that in 2020, more than half the participants already anticipate revenue losses greater than 20% while 12% are forecasting revenue losses greater than 50%.
The majority of survey participants anticipate that the economy will need at least 12 months to 24 months to fully recover from the pandemic while 30% of participants project a two-year to five-year recovery timeline. Almost 75% of tenants have informed their property owner that they will need at least six months to 12 months or longer for their business to recover.
ABLI’s Strober stated of the survey’s findings, “This survey makes it abundantly clear that the pandemic is dealing a devastating blow to Long Island’s economy. We anticipate May’s results, after a full six weeks of economic shutdown, to be worse.”
He adds that the goal of the ongoing survey is to create an accurate barometer of current market conditions that will be a powerful tool when stating the need for federal, state, and local assistance in order to restart our economy. The results of the survey can also provide guidance as to what government assistance could be most helpful to tenants, including rental assistance vouchers and commercial mortgage forbearance, Strober notes.
Literally every respondent is projecting a decrease in 2020 second quarter revenue with 22% of those surveyed anticipating losing at least half of their earnings. When asked about projecting for the year some 41.5% already see as much as 50% of their revenue declining.
Approximately 34% of the real estate owners surveyed believe it will take one to two years for Long Island to recover, while more than 29% predict recovery at anywhere between two to five years. It will take a projected 12 to 24 months for tenants to secure a financial recovery according to 39% of the real estate owners responding to the survey question.
LIBI CEO Mitch Pally, says, “These results underscore the importance of economic recovery programs now underway by federal, state, and local governments along with the need to not only implement them but sustain them to ensure the economy stabilizes and then is restored to health.”
He adds, “With Long Island playing a crucial role in New York’s economy, particular emphasis needs to be placed on a region of 2.85 million people whose economic landscape is now unrecognizable.”
The retail real estate sector on Long Island has been impacted the most by COVID-19. The majority of retail landlords experienced non-payment of April rent from more than half of their tenants. Some Long Island retail property owners are experiencing nonpayment rates as high as 85% in April.
The next hardest hit sector was the commercial office segment with 30% of participants experienced nonpayment of rent from 21%-50% of their tenants, while 15% of survey participants saw more than 50% of their tenants miss April’s rent.
The industrial segment was significantly less impacted. The survey indicated that 42% of participants remained at pre-pandemic rent collection rates of 95% or greater.
Strober and Pally also note that 30 days into the pandemic induced economic shutdown, nearly 20% of those responding to the survey are facing the prospect of anywhere from 20% to 50% of their tenants going out of business.
The survey received 41 responses. Combined, those participants represent approximately 61.4 million leased square feet and 32,718 residential units. The average participant represents 884 residential units and more than 1.57 million square feet of leased space. The April survey marked the first of what will be monthly surveys designed to identify issues that will define strategies for recovery on Long Island.