MinnesotaIndustrialMultifamilyRetail NAIOP survey: Normalcy is a long way away Dan Rafter August 14, 2020 Share on Facebook Share on Twitter Share on LinkedIn Share via email Industrial remains a bright spot during the COVID-19 pandemic. Commercial real estate professionals aren’t hoping for miracles these days. A recent survey by NAIOP found that plenty of the association’s members expect COVID-19 to impact their businesses for a long time. The survey of 347 NAIOP members released in early August found that exactly half of respondents said that they expect coronavirus to impact their business operations for more than a year. These results, collected in July, show that NAIOP members are less optimistic now than they were earlier in the pandemic. In June, the survey found that 39.7 percent of respondents expected COVID-19 to impact their businesses for longer than a year. In April, only 36.4 percent of respondents felt the same. The NAIOP said that this increase in pessimism might be related to the rapid growth in the number of reported COVID-19 cases across the United States since June. This shift also comes as more developers face a greater number of COVID-related challenges. The NAIOP said that more of these CRE professionals are struggling with delays in acquiring permitting and entitlements, delayed financing, supply shortages and contractors declaring force majeure or filing for bankruptcy. This is a reversal of earlier trends and, according to the NAIOP, is another reason why some developers are now predicting a longer impact on their businesses from COVID-19. Some of the quotes the NAIOP gathered from survey respondents illustrate the frustrations that CRE professionals feel today. “The optimism we experienced recently when restrictions were somewhat lifted has disappeared,” wrote one respondent. “The pandemic will transform most types of CRE, including offices, hospitality, rental housing for families and assisted living,” wrote another. “Very few sectors won’t be facing transformational pressures caused by the pandemic and its economic impacts.” There is some good news in the NAIOP survey, with respondents reporting positive growth in industrial, office and multifamily building acquisitions in July. The rise in the number of acquisitions was strongest in the industrial sector, with 92.6 percent of respondents saying that they witnessed such an acquisition during the three weeks before they were surveyed in July. That figure stood at a lower 70.7 percent in NAIOP’s June survey. Reported development activity also increased for industrial, office and multifamily properties in July. This is especially good news for the office sector. The July survey reported the first significant increase in office property development since NAIOP’s April survey. A total of 16.5 percent of respondents reported new office development in July while only 8.5% did in June. Although increased office activity suggests the sector is improving, these deals remain uncommon in many markets, with a slight majority of respondents — 52.2 percent– reporting that they saw no office deals in the last three weeks. And the news for the retail sector remained grim, with 79.6 percent of respondents saying they saw no new retail acquisition or development during the three weeks preceding the survey. “I primarily work the industrial sector and it has been very busy,” wrote one survey respondent. “E-commerce is alive and well.” Rent collections remained strong, too. More than three-quarters of office, multifamily and industrial building owners and operators reported that 90 percent to 100 percent of their tenants had paid their rent in full and on time in July. Retail property rent collection rates did improve in July, but the numbers here remained weak. According to the survey, 51 percent of respondents said that 25 percent or more of their retail tenants had not paid rent in full and on time as of July 15.