Pandemic Unlikely to End Construction in 2020
Pipeline Brass Tacks
The global pandemic is new territory for commercial real estate, but the last few weeks of life with COVID-19 and previous national economic crises have given experts enough evidence to predict changes in deliveries for 2020. Multifamily completions will likely trail initial annual forecasts by 15 to 20 percent, according to Marcus & Millichap’s new Global Health Crisis: Commercial Construction-Special Report. The office sector is expected to experience a decline of 20 to 40 percent, resulting in the completion of 60 to 80 million square feet of space. Retail will also see a reduction in new supply of as much as 40 percent, resulting in the delivery of 25 to 35 million square feet of new offerings. The industrial sector, which will be perhaps the least affected sector due to the coronavirus-induced rise in e-commerce activity, will finalize 210 to 260 million square feet in 2020.
“The impact of ongoing project delays, a potential rise in construction costs and a shift in the supply and demand outlooks will reshape project viability, causing many to be mothballed until a clear, positive outlook reemerges,” according to the Marcus & Millichap report. “Speculative developers and builders with hotel and multi-tenant retail proposals on the books are likely to avoid project starts. Multifamily builders will also recalibrate their models, reassessing whether upcoming supply additions will be met with sufficient demand.”