As NAIOP's I.CON Virtual 2020 conference kicked off this week, keynote speakers, panelists and a COVID commercial real estate tracking survey all pointed to the strength and momentum of the industrial real estate sector.
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.
Speaking at the conference on Tuesday, Steve Schnur, EVP, Chief Operating Officer, Duke Realty, reinforced the point. "Ninety days ago we were all in a state of discovery, concerned about rent collection. Today, we've collected 99.8 percent of our rent every month through June."
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 (see chart below). 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 a third of respondents reporting mandated halts in May.
The survey is the third conducted by NAIOP during the COVID crisis. Three hundred, fifty-one NAIOP members completed the survey, which was fielded between June 15 and 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 between April 20-22, 2020. The second survey was completed by 461 NAIOP members between May 18 and 20, 2020.
During the keynote address to kick of I.CON, Spencer Levy, Chairman of Americas Research and Senior Economic Advisor, CBRE said his forecast for industrial real estate, two or three years from now is better today than it was in January pre-Covid.
"The shifts you have seen accelerated have all benefited industrial. 2020 is still going to be a challenging year."