Many Commercial Real Estate Sectors Faring Well, Despite Economic Shock

Nareit Senior Economist Calvin Schnure told an AEI panel discussion that several commercial real estate sectors are holding up well, despite the size of the economic shock resulting from COVID-19.

Speaking June 24, Schnure said that the lodging and retail sectors will take quite some time to recover and the office sector faces longer-term structural change, but “many of the other sectors are actually not in much trouble.”

For example, several REIT sectors are linked to the internet economy and have gotten a boost in demand. Year-to-date returns for data and infrastructure REITs are up 15% to 20%, a return which would be impressive in any year, let alone in the current situation, Schnure observed.

Schnure highlighted the large amount of support the economy has received in terms of stimulus funds, $2.2 trillion of which remains on the sidelines in bank deposits ready to be spent as the economy reopens. “This is the dry powder that will fuel the recovery,” he said.

Meanwhile, more than half of the market capitalization within the REIT industry reflects sectors that are gaining from increased use of e-commerce, Schnure noted. He also pointed out that Nareit’s membership rent survey shows that most sectors are collecting upwards of 90% of rent payments.

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