Market working to find normalcy amid the prolonged pandemic
The COVID-19 Pandemic has understandably shaped the 2020 CRE world and will continue to do so well into next year. Recent vaccine news has been encouraging but is believed to be more than six months away from widespread availability. Because of surging infection numbers and intermittent shutdowns economic volatility is likely to continue into at least mid-2021. Despite these challenges, the market has found a working normal involving a cautious office market, an active industrial market and a retail market undergoing a transition. Until the vaccine is widely available, all three asset classes will continue to operate under this newly formed paradigm. Consumers will continue to show a preference for services that enable minimal contact and minimize disruptions to their lives, even after vaccine availability, and the market will continue to build around these preferences. Unemployment figures have shown as low but steady march downward following generational highs at the onset of the pandemic. The lowering numbers are encouraging, but the trend is fragile and tied to the severity of COVID mitigations. Expect these figures to be linked throughout the pandemic. Source: NAIDB analysis of data from NJ Department of Labor, Bureau of Labor Statistics, Costar.
As shown in Figure 1, average net asking rents hit another all-time high in Fall 2020, reaching $8.67 psf. The trend for overall asking rates have been climbing higher over the last five years, continually setting new records. Class A rents have also been elevating, with net asking rates ending Fall 2020 at $9.35 psf. Rents should continue to rise, with the demand for this product being increased by the pandemic economy.