Recovering from COVID-19

As more people are vaccinated, travel restrictions are lifted and the American economy is roaring back to life, leaving industrial real estate king and office real estate in an uncomfortable transition. From Chicago and New York to Memphis and Philadelphia, industry pros share their learnings from the pandemic and optimism for the future.

Steve Connolly, SIOR, executive vice president and partner with NAI Hiffman in Chicago, says leading into the pandemic the industrial market was so strong with sales and new developments that many worried the great run had come to an end. As April and May rolled around, industrial rent collections were solid. After the initial shock, the message to brokers was to find deals with developers looking for opportunities in a capital-rich environment.

That approach for Connolly led to a great year finding new opportunities that closed between the end of 2020 and early 2021. Buildings that had good activity pre-pandemic continued to lease-up. In June, for example, Connolly’s team was in negotiation for a 575,000 square foot, two-building industrial project on behalf of Bridge Development and Cabot Properties. Negotiation for the last-mile, in-fill development in Cicero, Ill. progressed accordingly with no interruption. “This was generally the case for industrial development projects in Chicago during 2020.”

Connolly says he found that strong companies and developers looked at it as a moment in time and continued to grow. New companies with no prior industrial background are entering the Chicago industrial market, driving up prices and creating more development opportunities in areas farther out from the urban core that might not have been considered five years ago. “There's a lot of competition and maybe you don't want to be that guy that overpaid for a site that's closer in,” he explains. Connolly also believes the shift to working from home is temporary, and that once that the country reopens, remote working will allow for flexibility and serve to attract top talent.

New York, in contrast, has seen deals become more competitive. “Things are getting a little bit more aggressive on deals and getting a little bit more comfortable,” says Jason Gold, investment broker for New York City-based Ariel Property Advisors responsible for business development in the Bronx. Underwriters have also become more conservative, requiring more equity in deals.

In the first quarter, Ariel has signed on a dozen deals in the Bronx alone with industrial, warehouse, and even some retail properties coming back to useful life.

Gold says in the past few months he’s seen film studio space and ghost kitchens (restaurants that offer delivery-only) become a big play around Silvercup Studios, the city’s most iconic production facility. Investors looking for industrial and warehouse space. “It's not just that ‘Amazon effect,’ which is definitely still in play,” Gold notes.

Read the full article in the Summer 2021 issue of SIOR Report now!