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<\/a><\/h2>\nBest-case scenarios<\/h2>\n
The economic downturn prompted by the coronavirus will largely resemble previous cycles, predicts Wolff Cos. Chairman & President David Wolff.<\/a> \u201cThere will be stress on all properties, but those that are sound and the ones that followed fundamentals will survive,\u201d he said. Early consensus that e-commerce warehouses and apartments will outperform most sectors remains conventional wisdom. <\/p>\nCOVID-19 may boost the performance of suburban multifamily properties. Some city-dwelling Millennials may seek an alternative to dense environments that heighten the risk of spreading an infection. And the surge in remote work is likely to drive demand for units with space for home offices.<\/p>\n
\nREAD ALSO:<\/strong> CRE Executives See Glimmers Emerging From Tough Times<\/a><\/p>\n
\nThose factors could hasten the trend of Millennials exiting urban neighborhoods for settings with more elbow room. \u201cThey may decide that they should do it sooner rather than later, and, in fairly short order, we expect that to translate into some intra-metro migration to suburban locations,\u201d said Lee Menifee, the head of Americas investment research at PGIM Real Estate. <\/p>\n
Multifamily performance has been a pleasant surprise. The National Multifamily Housing Council reported that June rent collections reached 94.2 percent\u2014nearly on par with June 2019 figures.<\/p>\n
A potential upside could be continued leasing velocity and minimal rent compression, noted Diane Batayeh, the CEO of Village Green, a Southfield, Mich.-based investor-operator. \u201cOver the long term, apartment fundamentals and demand still look strong,\u201d she said. Programs like supplementary federal unemployment insurance and the paycheck protection program helped renters stay current in the early months of the pandemic. <\/p>\n
\nREAD ALSO: Why Suburbs, Secondary Markets Will Benefit From the Recovery<\/a><\/p>\n
\nThe health crisis has accelerated the broader shift to online shopping, and that\u2019s a plus for last-mile industrial properties. Nonstore retail sales increased more than 25 percent year-over-year in May, according to the U.S. Department of Commerce.<\/p>\n
Technology has enabled a broad-based transition to remote work for millions of employees. Many occupants plan to make remote work permanent for at least some of their employees, a trend that could bring good news for suburban office markets that have been declining for some time. Some central business district tenants are likely to add satellite locations to accommodate those who reside in the suburbs.<\/p>\n
Uncertainty over what\u2019s next for the office sector could be relatively short-lived if a vaccine emerges, suggested Transwestern President Tom Lawyer. \u201cSafety is going to be paramount as companies bring people back to the office,\u201d he said.<\/p>\n
\u201cBut when you make major decisions during a crisis without the needed clarity, the pendulum usually swings too far. We\u2019re advising our clients to take appropriate actions, but to remain flexible and think about the long term.\u201d<\/p>\n
![\"\"](\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2020\/08\/iStock-922736714-storm.jpg\")
<\/a><\/p>\nWorst-case scenarios<\/h2>\n
Most forecasts assume it will take the job market several good years to rebound fully, and investment has quickly reflected those concerns. Green Street Advisors estimated that during the first three months of the crisis, property prices dropped 11 percent, while mall and lodging prices declined 25 percent.<\/p>\n
Assets that were already struggling are particularly susceptible. \u201cProjects that are over-leveraged, in overbuilt areas, or those that were dubious to begin with will pay the price,\u201d Wolff said.<\/p>\n
Perhaps the hotel sector faces the most problematic prospects. \u201cNobody plans for scenarios where you go from peak occupancy to virtually zero,\u201d said Peter Sherman, a Los Angeles-based principal with Avison Young. Year-over-year occupancy declined 52.1 percent to 33.5 percent during the second quarter, and RevPAR fell 69.9 percent to $27.98, reported STR. <\/p>\n
Some initial data suggested the office sector\u2019s comeback could vary widely by metro. In mid-July, properties in Los Angeles were 32.3 percent occupied, according to Kastle Systems\u2019 study of buildings it serves. Occupancy stood at 10.1 percent in the New York City metro area and 18.1 percent in Chicago.<\/p>\n
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COVID-19 may boost the performance of suburban multifamily properties. Some city-dwelling Millennials may seek an alternative to dense environments that heighten the risk of spreading an infection. And the surge in remote work is likely to drive demand for units with space for home offices.<\/p>\n
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READ ALSO:<\/strong> CRE Executives See Glimmers Emerging From Tough Times<\/a><\/p>\n Those factors could hasten the trend of Millennials exiting urban neighborhoods for settings with more elbow room. \u201cThey may decide that they should do it sooner rather than later, and, in fairly short order, we expect that to translate into some intra-metro migration to suburban locations,\u201d said Lee Menifee, the head of Americas investment research at PGIM Real Estate. <\/p>\n Multifamily performance has been a pleasant surprise. The National Multifamily Housing Council reported that June rent collections reached 94.2 percent\u2014nearly on par with June 2019 figures.<\/p>\n A potential upside could be continued leasing velocity and minimal rent compression, noted Diane Batayeh, the CEO of Village Green, a Southfield, Mich.-based investor-operator. \u201cOver the long term, apartment fundamentals and demand still look strong,\u201d she said. Programs like supplementary federal unemployment insurance and the paycheck protection program helped renters stay current in the early months of the pandemic. <\/p>\n READ ALSO: Why Suburbs, Secondary Markets Will Benefit From the Recovery<\/a><\/p>\n The health crisis has accelerated the broader shift to online shopping, and that\u2019s a plus for last-mile industrial properties. Nonstore retail sales increased more than 25 percent year-over-year in May, according to the U.S. Department of Commerce.<\/p>\n Technology has enabled a broad-based transition to remote work for millions of employees. Many occupants plan to make remote work permanent for at least some of their employees, a trend that could bring good news for suburban office markets that have been declining for some time. Some central business district tenants are likely to add satellite locations to accommodate those who reside in the suburbs.<\/p>\n Uncertainty over what\u2019s next for the office sector could be relatively short-lived if a vaccine emerges, suggested Transwestern President Tom Lawyer. \u201cSafety is going to be paramount as companies bring people back to the office,\u201d he said.<\/p>\n \u201cBut when you make major decisions during a crisis without the needed clarity, the pendulum usually swings too far. We\u2019re advising our clients to take appropriate actions, but to remain flexible and think about the long term.\u201d<\/p>\n Most forecasts assume it will take the job market several good years to rebound fully, and investment has quickly reflected those concerns. Green Street Advisors estimated that during the first three months of the crisis, property prices dropped 11 percent, while mall and lodging prices declined 25 percent.<\/p>\n Assets that were already struggling are particularly susceptible. \u201cProjects that are over-leveraged, in overbuilt areas, or those that were dubious to begin with will pay the price,\u201d Wolff said.<\/p>\n Perhaps the hotel sector faces the most problematic prospects. \u201cNobody plans for scenarios where you go from peak occupancy to virtually zero,\u201d said Peter Sherman, a Los Angeles-based principal with Avison Young. Year-over-year occupancy declined 52.1 percent to 33.5 percent during the second quarter, and RevPAR fell 69.9 percent to $27.98, reported STR. <\/p>\n Some initial data suggested the office sector\u2019s comeback could vary widely by metro. In mid-July, properties in Los Angeles were 32.3 percent occupied, according to Kastle Systems\u2019 study of buildings it serves. Occupancy stood at 10.1 percent in the New York City metro area and 18.1 percent in Chicago.<\/p>\n
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\n<\/a><\/p>\nWorst-case scenarios<\/h2>\n
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