Research from Avison Young shows a downward trend in the real estate market based on a sample of dozens of public REIT stocks since the coronavirus outbreak.
The industrial sector saw the lowest percentage drop of the sectors reviewed and there's a "meteoric rise" in demand for online grocery deliveries and e-commerce goods, according to Avison Young.
Erik Foster is a Avison Young principal and the leader of the firm's national industrial capital markets group. He said in a statement that the growth in e-commerce, along with an increasing reliance on logistics and distribution space, "should put the industrial sector in a strong position to recover at a faster rate than other sectors."
The hardest hit sectors have been hospitality and retail, according to the firm. There's historically low hotel occupancy rates and "non-existent" foot traffic at retail centers, meaning those assets have the highest bankruptcy risk, the firm says.
"By looking at the performance of REITs concentrated in the commercial real estate industry we can see the far reaching impact on the industry and notably the sectors driven by discretionary consumer spending and travel," Foster said in prepared remarks. "The silver lining is in the data center sector that is seeing a surge in attention given the growing importance of connectivity in keeping businesses operating."
As tenants struggle to pay rent, the multifamily industry could see an uptick in vacancies if the rates of unemployment rates continue to go up, according to the firm.
The office sector will continue to be burdened by shelter-in-place measures until employees are allowed back for in-office work, the firm warned. It also said flex office space will hurt since guidelines on social distancing run counter to the benefits of a community office space.
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Ryan Tarinelli
Ryan Tarinelli is a reporter at the New York Law Journal. He is based at the New York State Capitol in Albany, New York. He can be reached through email at [email protected]. Follow him on Twitter: @ryantarinelli.
