Moody’s Analytics forecasts that industrial real estate will begin to suffer this year as the economy continues to struggle with the pandemic-driven blows experienced since early 2020.
Also seen not doing well will be several of the other forms of commercial real estate impacted by Covid 19 – multi-family housing, office buildings and retail.
“The industrial sector has outperformed other real estate property types during the pandemic as demand remained strong,” noted Victor Calanog, head of CRE Economics at Moody’s Analytics.
“However, future growth for the sector is dependent on getting Covid 19 cases under control, and additional financial aid by the government to support consumers as the economy begins to recover,” in late November, after third-quarter economic data had been released.
The sector will likely not remain unscathed over the next year as a surge in Covid 19 cases forces further shutdowns and a fall in international trade volumes weighs on the manufacturing industry, according to the firm, which provides financial intelligence and management services.
It expects that industrial property vacancy rates will rise to 11.8% in 2021, and predicted the sector is about to incur its biggest drop in effective rents in 10 years, down 4.5% in 2021.
However, Moody’s Analytics also projects that industrial properties can be expected to recover quickly, supported by the continuing long-term trend toward online commerce.
“Logistics facilities are in high demand, given how retail sales have rebounded and hit historic highs for some e-retailers,” the company said. “As vacancy rates decline steadily over the next five years, effective rents are forecast to rise by 1.4% in 2022.”