NAIOP Survey Shows Deal Improvement Despite Rising Pessimism

Deal activity in commercial real estate is rebounding, according to the fourth monthly survey by NAIOP.

An increase to 92.6 percent of respondents witnessed industrial properties acquisitions, compared to 70 percent in June. However, about 52.2 percent of respondents say they witnessed no deals in office properties in the last three weeks. Deals in the retail property sector also remain low, with 79.6 percent of respondents witnessing no deals or development. However, building acquisitions in the industrial sector increased from 70 percent to more than 90 percent of respondents in June to July.

In terms of rent collections, the news is more optimistic. About 75 percent of owners in the office, multifamily and industrial sectors responded that more than 90 percent of their tenants paid their rent in full in July. This shows an improvement from April. However, rents on retail property only improved slightly, with 51 percent reporting that about a quarter of their tenants did not pay their rent on time nor in full.

Landlords reported at least 10 percent of their tenants in the office or industrial sectors requested rent relief in some form, and more than 10 percent in the multifamily sector also requested rent relief. Owners and property managers reported little change in working with tenants on rent relief, with most offering to accept delayed payment or amortized rent payments, or payment over a longer time period. About 71.1 percent of respondents requested that tenants provided evidence that they were in financial troubles.

About 50 percent of respondents expect the pandemic to impact their business operations for more than the next 12 months, an increase from 39.7 percent in June. Contributing to the pessimism could be the increase in number of reported coronavirus cases in the country, delays in development and obtaining permits, delays in financing, and supply shortages.