COVID-19’s Impact on the Industrial Market
By: Nick DePaolera, Sales Associate, NAI James E. Hanson
In times of volatility, it is natural to react nervously to swings in the commercial real estate industry caused by news headlines and current events. However, during times like this, it is the job of brokers to help manage these emotions on behalf of our clients by leveraging our deep understanding of the market and potential short-term and long-term impacts.
At this point, our team has reason to believe COVID-19 will have a long-term impact as it pertains to the industrial/warehouse sector. In the short-term, the impacts of the COVID-19 outbreak and ensuing economic volatility will be felt widely throughout the sector. However, as history shows, events like this may have a positive influence on the value of industrial/warehouse assets over the long-term.
Recent trade tensions have meant that we have seen a shift from ‘globalization’ to what we are now calling ‘localization’ among U.S. manufacturers. Now with COVID-19 creating even further complications in the supply side equation, we expect companies with a large U.S. consumer base will only accelerate their conversations surrounding the relocation or expansion of operations back to the states in attempt to manage future supply chain disruption.
In the end, the consumer base remains healthy, interest rates are at record lows, and the Federal Reserve Bank stands ready to cut rates again. If companies are contemplating the decision to move back, all of these factors will justify the investment right now. As such, our team feels optimistic this sector will be a sound investment for both investors and owner/users the remainder of 2020 despite short-term volatility.
These economic impacts will inevitably complicate all real estate transactions. In a market as complex and fast moving as ours, it is imperative that companies considering entering our local market consult with an experienced commercial real estate advisory team before making any real estate decisions. Our team remains open to answering any questions or comments and you can reach me at ndepaolera@naihanson.com or 973-240-2140.
