Moody's Analytics Q2 Report Gives Mixed Picture on CRE

The current pandemic has affected most aspects of the commercial real estate industry, but a Moody’s Analytics report says some sectors have been hit much harder than others.

Moody’s looked at the impact on several categories in the second quarter of 2020 including industrial, warehouse and distribution and flex/research and development.

The data, Moody’s Analytics said, “show that the industrial sector was mixed in the quarter as warehouse/distribution held up better than other property types as e-commerce sales continued to grow throughout the pandemic.”

The report says that flex/research and development space “saw the biggest jump in vacancy in the quarter, more than any other property type.”

With regard to the industrial sector, the report says the impact of COVID-19 will “come at a lag.” The report says that’s so, primarily, because there is a consumer shift to online purchases that have been “supporting the sector in the interim.”

On the warehouse and distribution front, the data says, there was little if no change on those statistics.

Construction, the report details, fell to a low of 16.1 million square feet in the quarter. That, the report says, is from 30.2 million square feet of new warehouse space added in the first quarter and an average of 31.6 million square feet of new inventory added per quarter in 2019.

A real poor performing area that was hard-hit by the now five-month old pandemic was occupancy growth related to rents. The report said: “Alongside weak construction and occupancy growth this quarter, the average asking and effective rents grew 0.1% and 0.0% respectively, in the second quarter. This was also the weakest since 2011, but, it was nevertheless positive which was surprising given the extremity of the shutdown.”

Flex/research and development, Moody’s Analytics reported, didn’t fare well and “suffered the steepest decline in occupancy of any property type…. This scant growth corresponded to an inventory growth rate of 0.03% while the occupancy decline was 0.38%.”

Depending on where you lived, rent growth in flex/research and development space varied.

Raleigh-Durham, North Carolina saw an increase of 280,000 square of new completions in space in the second quarter, while suburban Virginia saw an increase of 92,000 square feet.

Twenty-six metro areas in the country saw an effective rent decline in the second quarter of the year led by Houston, Jacksonville, Los Angeles, Seattle and Fort Worth, Texas,

On the other hand, metro areas with the highest effective rent increases in the quarter included Columbus, Ohio; Miami and Fort Lauderdale in south Florida; suburban Virginia; and Phoenix.

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