{"id":1004472994,"date":"2020-08-24T05:14:13","date_gmt":"2020-08-24T13:14:13","guid":{"rendered":"https:\/\/www.commercialsearch.com\/news\/?p=1004472994"},"modified":"2020-08-24T05:14:13","modified_gmt":"2020-08-24T13:14:13","slug":"industrial-real-estate-faces-short-term-decline-in-naiop-report","status":"publish","type":"post","link":"https:\/\/www.commercialsearch.com\/news\/industrial-real-estate-faces-short-term-decline-in-naiop-report\/","title":{"rendered":"Industrial Real Estate Faces Short-Term Decline in NAIOP Report"},"content":{"rendered":"
\"\"<\/a>

Image via Pixabay.com<\/em><\/p><\/div>\n

Given the U.S. economy\u2019s deterioration and the likelihood that the recession will continue through the end of this year, industrial space absorption will decline sharply in the third quarter, according to a report from NAIOP.<\/p>\n

\n

READ ALSO<\/strong>: COVID-19 Impact Concerns on the Rise in CRE<\/a><\/p>\n

\n

NAIOP’s Third Quarter Industrial Space Demand Forecast anticipates this backsliding, despite industrial real estate having outperformed other commercial property types up until now due to the surge in e-commerce<\/a>. The report expects  industrial net absorption to decline to negative 141 million square feet in the third quarter. \u201cNet absorption is forecast to remain negative after Q3, with negative absorption of approximately 72 million square feet in Q4 2020 and 27 million square feet in Q1 2021<\/em>,\u201d the report states.<\/p>\n

\"\"<\/a>

Dr. Timothy Savage, Clinical Assistant Professor of Real Estate at the Schack Institute of Real Estate, New York University, and co-author of NAIOP\u2019s Third Quarter 2020 Industrial Space Demand Forecast. Image courtesy of NAIOP<\/em><\/p><\/div>\n

Though the forecast envisions a return to positive net absorption by the second quarter of 2021, \u201cgrowth in industrial absorption consistent with pre-pandemic trends \u2026 is not forecast to resume until Q1 2022<\/em>.\u201d<\/p>\n

Even before the pandemic, NAIOP points out, the growth of e-commerce was disrupting commercial real estate, in part because of the greater efficiency of e-commerce distribution versus brick-and-mortar retail. NAIOP foresees the pandemic likely accelerating this transition and adds, \u201cThe automation of physical tasks within warehouses and distribution centers has the potential to increase their efficiency, further contributing to e-commerce\u2019s competitive advantage over traditional retail<\/em>.\u201d<\/p>\n

Larger trends in play<\/h2>\n

In the shorter term, however, pandemic- and recession-related challenges to industrial real estate include \u201csignificant disruptions to supply chains and global trade, reduced manufacturing and construction activity, and widespread store closures among brick-and-mortar retailers<\/em>,\u201d according to NAIOP.<\/p>\n

\"\"<\/a>

Dr. Hany Guirguis, Professor of Economics & Finance, Manhattan College, and co-author of NAIOP\u2019s Third Quarter Industrial Space Demand Forecast. Image courtesy of NAIOP<\/em><\/p><\/div>\n

The report suggests these trends and the overall recession \u201care likely to impair the performance of industrial properties that are not well-positioned for e-commerce distribution<\/em>.\u201d<\/p>\n

In the overall economy, several indicators present challenging conditions for industrial real estate.<\/p>\n