Early on during the pandemic, industrial looked like it would be the beneficiary of the market dislocation. Now, more than three months in, asset prices have proven that to be true. While other asset classes have seen a significant change in asset pricing, industrial has seen a flat or nominal change in prices. As a result, CapRock Partners, a West Coast industrial investor and developer, has remained an active player.

"We are an active buyer in the marketplace," Jon Pharris, president of CapRock Partners, tells GlobeSt.com. "Through the pandemic, we have been buying assets, and we have multiple properties scheduled to close this summer. There has been a very slight pricing change across the marketplace in industrial, unlike other asset classes that have had very significant pricing changes. The demand drivers for industrial have been the same, and we are not expecting significant price changes."

Pricing adjustments in industrial have not been widespread, but rather have focused on specific asset classes. Small box, for example, is more exposed to pricing adjustments than big box and ecommerce-serving properties. However, properties with fundamental business challenges—cash flow problems, vacancy, short-term leases—are seeing the most significant pricing adjustment. "The pricing adjustments in the marketplace really vary based on the type of the asset and the quality of the asset and the quality of the tenant," says Pharris. "There has been a real flight to quality during the pandemic, and the newer projects that are stabilized and have institutional quality tenants have had no price change. The properties that are in some sort of a transition have been the most impacted."

The same can be said about rental rates. Pharris expects lower-quality assets to see rental rate adjustments. "Not every industrial building is created equal, and some size ranges are incredibly supply constrained," he says. "We have seen the most active 90-day period that we have ever had across our portfolio in terms of RFPs and signed leases, especially for properties that are larger than 100,000 square feet. On the flip side, smaller tenants that are less than 20,000 square feet have had slower activity. That is where we are seeing more stress in the market place."