NAIOP: COVID-19’s impact on development is less severe
NAIOP today released the results of a second survey on the impact of the COVID-19 crisis on commercial real estate. Although conditions are broadly similar to those released in April, the results reveal a moderate rebound in acquisitions and new development and a modest decline in the outbreak’s effects on current development projects.
Among the key highlights:
• The outbreak’s effects on current development projects are slightly less pronounced than they were in April. A large majority of respondents still report delays in permitting or entitlements (62.3%) and lower leasing activity for current projects (57.2%) since the outbreak. However, except for a small increase in the share of respondents who reported delays in financing, the share of respondents reporting negative effects on current projects was lower for every metric (delays in permitting, decline in leasing, delays due to onsite social distancing, government shutdowns, supplies shortages and others) measured than in April. The most notable difference from April is a sharp decline in the share of respondents who reported delays or shortages in construction supplies, from 31.1% to 19.1%.
• Survey results also point to an increase in acquisition and development activity in industrial and multifamily properties. The proportion of respondents who reported witnessing new development in the industrial sector increased from 18.5% in April to 25.5% in May, and those reporting acquisitions of existing industrial buildings or those currently under construction increased from 57.3% to 62.6%. The share reporting development of multifamily properties increased from 16.8% to 21.5%.
• More respondents expect the outbreak’s effects on their business operations will last longer than a year. Although a majority of respondents (54.5%) still expect the outbreak will have a significant effect on their business operations for a year or less, the share of respondents expecting this impact to last more than a year has grown, from 36.4% in April to 45.5% in May.
“We are seeing a slight uptick in activity and indications that the immediate negative impact on commercial real estate development may be behind us,” said Thomas J. Bisacquino, NAIOP president and CEO. “The number of respondents who say the outbreak’s effects will linger longer than a year may signal that the economic recovery will be more gradual that initially expected.”
The first survey was completed by 446 NAIOP members April 20-22, 2020. Respondents represent a range of professions, including developers, building owners, building managers, brokers, lenders and investors. The second survey was completed by 461 NAIOP members May18 – 20, 2020. NAIOP plans to issue the next survey in June.