Avison Young New Jersey published the firm’s first-quarter report for 2020 which includes both in-depth information on the current state of the market as well as insights on the future of the industry considering the ongoing COVID-19 pandemic.
One of the report’s key takeaways refers to a continuous trend in both the office and industrial sectors as vacancy rates have continued dropping as rents increased. There was a 130-basis point drop in the office vacancy rate since Q1 2019 while the industrial vacancy rate dropped to 2.5 percent when compared to Q1 2019’s 3.4 percent.
“Although our team has focused on developing an insightful and detailed look into both the office and industrial real estate sectors for this year’s first quarter, we can’t ignore the new COVID-19 reality. In that sense, we have included further information and analysis on what the government is currently doing and what we can expect from the market in the months to come,” said Jeff Heller, principal and managing director of Avison Young New Jersey.
Prior to the outbreak of COVID-19, the office market was experiencing a trend of users looking for higher quality space, with a smaller size footprint. This trend is expected to intensify as a result of this crisis, which has shown companies how much business is possible to be accomplished over the phone and video conferencing. This change in the way companies conduct their business will force landlords to update their properties to meet the new reliance on alternative communication channels. This crisis has also forced many businesses to review and implement contingency procedures. As a result, Avison Young is expecting companies to take look at their organization, to see if they have enough redundancy to ensure continuity through another crisis, and as a result create satellite offices around the country and the world. On the flip side, it is expected that companies will be returning to their offices with a smaller workforce, as well as a smaller bottom line, which can lead to the decision to reduce their current space.
Over the past few years, the industrial market has reached unprecedented levels in terms of rent and vacancy. This recent success has been driven for the most part by e-commerce and the warehouses that support the e-commerce industry. As a result of this pandemic, companies are taking a hard look at their supply chain and trying to determine how it was able to handle this crisis. At the beginning of the pandemic when the effects were limited to China, many companies came to realize that they were not as diversified as they once thought. Avison Young said it is expecting to see a reshoring of some of the essential components of many products, most notability pharmaceuticals, and other medical devices. The virus and the subsequent “stay-at-home” orders have forced many people to become completely reliant on e-commerce. Many practices such as ordering your groceries online, that seemed foreign to many, are now part of their routine. We are expecting this change in habit to remain in some part, which will cause a further intensification of the industrial market, particularly in the cold storage sector.
