COVID’s impact on CRE may be less severe than anticipated

By Mike Sunnucks | Rose Law Group Reporter

COVID-19’s impact on commercial real estate may not be as severe as first anticipated but the economic recovery may also take longer than expected.

That is according a new survey by commercial real estate group NAIOP.

COVID-19’s impact on commercial real estate is significant. The NAIOP survey of 446 CRE professionals found 62 percent still report delays in permits and entitlements and 57.2 percent report drops in leasing activity.

The national survey of commercial real estate professionals found a moderate rebound in acquisitions and developments and slight decline in Coronavirus’ impact on existing projects.

Financing delays continue but other negative impacts were less severe in May than April when COVID shutdowns and closures were in full force, according to the NAIOP survey.

The number of CRE respondents reporting delays or shortages in construction supplies declined from 31 percent in April to 19 percent in May.

The most optimistic indicators were for new developments in industrial and multifamily. Those two segments were strong before the pandemic hit.

The NAIOP survey found a majority of respondents (54.5 percent) expect the pandemic to have a significant impact on their business for a year or less. The share of survey respondents expecting COVID’s impact to be more than a year has grown from 36.4 percent in April to 45.5 percent 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.”

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