United States Capital Markets Report

The initial impact of Covid-19 on investment volume across all property types was first captured in March, but the full effect will not be seen until April, May and June. On the investment sales side, March volume declined 39.6% while financing volume declined 42.5% month over month for all property types.

Market pricing discovery remains limited, for all property types. Apart from landlords in distress, or those with pressing reasons to sell, most landlords are taking a “wait and see” approach for the duration of the initial phase of the crisis.

Commercial real estate investors have gotten clues from the stock market, via REIT pricing, on which property types the market deems to be most vulnerable: these include hospitality, retail and healthcare real estate. However, within these macro property types, specific markets and subtypes will provide greater value protection than others.

Similarly, the stock market has deemed data centers, self storage and industrial as the least vulnerable property types, with of fice and multifamily having above average protection. As with the lowest performing REITs, market and tenant exposure are the most important current data points.

April rent collection data from from NAREIT was more positive than expected and resulted in the following percentages of rent collected: 99.2% for industrial, 93.5% for multifamily, 89.3% for office, 85.7% for healthcare, and finally 46.2% for shopping centers.

There are very few indications of structural damage to the economy so far the nature of loan forbearance for lenders such as Fannie & Freddie, as well as the structure of the CARES act incentivize temporary furloughs and rent forgiveness, providing a cushion period for large swaths of the economy.