U.S. Retail Faces 11% Rent Drop In 2020: Moody’s Analytics
More turbulence is ahead for U.S. retail and office markets with retail rents alone expected to plummet 11% in 2020, according to Moody's Analytics latest market forecast.
Such a sharp decrease would make retail rents rival those from the Great Recession of 2008 by dropping nearly twice as deep, Moody’s says.
"The COVID-19 pandemic has prompted unprecedented challenges in the economy, and multifamily and commercial real estate markets are changing rapidly as a result," Moody’s Analytics Head of CRE Economics Victor Calanog said in a public statement.
"Store closures have made it difficult for retail tenants to pay rent, which has negatively impacted landlords. It is not yet clear how effective government support will be in this sector.”
The office sector also is changing mid-air with social distancing policies and stay-at-home lifestyles disrupting the country’s once iron-clad reliance on commercial office buildings.
Moody’s Analytics believes these changes will push national office vacancies up to 20% by 2021. And as vacancies rise, prices will fall, with rents in New York at risk of plummeting as much as 25%, Moody’s Analytics predicts.
Moody’s derives these estimates by studying rents and vacancies on eight property types throughout 3,000 U.S. submarkets.
Industrial and multifamily properties will also feel pangs from any recession this year, with vacancies and rents expected to take some hit, Moody's Analytics says. Despite this, these asset classes are better situated to weather the storm and are not expected to suffer as much as office or retail.