3 Months After Initial Coronavirus Outbreak, Development Market Shows Signs of Resilience

The commercial development space is showing signs of improvement just three months after the coronavirus pandemic threatened the entire industry, according to a new NAIOP survey.

The survey incorporates responses from 461 developers, building owners, managers, brokers, lenders and investors — all of whom reported a few more positives in the May market than when NAIOP last conducted its survey two months ago.

The number of respondents reporting construction delays and supply shortages fell from 31% in April to 19.1% for the week ending May 20. 

And, even though 62.3% of those responding still see delays in permitting and entitlements and 57.2% are still finding lower leasing activity levels on current projects, the number of overall survey respondents reporting issues with permitting, leasing and project delays declined from April to May, suggesting ongoing improvement as the nation gradually reopens. 

Respondents' confidence on the development and acquisition side of the industrial and multifamily markets also continued to improve last month. 

About 25.5% respondents saw new development occurring in the industrial sector, up from 18.5% in April, and 62.6% said they witnessed acquisitions of existing industrial buildings during the May survey period. Accounts of multifamily development grew from 16.8% in April to 21.5% last month. 

“We are seeing a slight uptick in activity and indications that the immediate negative impact on commercial real estate development may be behind us,” NAIOP President and CEO Thomas Bisacquino said in a statement. 

But though the data shows the market improving, 45.5% of respondents, an increase from 36.4% last month, say it will take more than a year to get business operations back to normal. 

“The number of respondents who say the outbreak’s effects will linger longer than a year may signal that the economic recovery will be more gradual that initially expected,” Bisacquino said.