According to Moody’s Analytics on its forecast in the first week of May, retail rents may drop at 11% this 2020. This is based on the current data of US CRE markets collected by the Moody’s Analytics Real Estate Information Services (REIS) group. Burdened with wide-scale store closures, retail industry is expected to be affected worst and might experience even twice the decline after the Great Recession.
“Store closures have made it difficult for retail tenants to pay rent, which has negatively impacted landlords. It is not yet clear how effective government support will be in this sector,” said Victor Calanog, head of commercial real estate economics at Moody’s Analytics, in a prepared statement.
Due to the continuing market closure and downturn in sales, a lot of companies are now filing for bankruptcy as an effect of the lockdown in different states that begun in March. The most recent ones include J.C Penney, Neiman Marcus and J.Crew J. Crew—and these are likely the first of many defaults and retail closures that analysts predicted in 2020.
With what is happening now, it’s projected that national retail vacancies are expected to rise. “Rent collection was down in April, May will be a similar story if not worse.” says Robin Trantham, a consultant with CoStar Group. Markets that are more exposed to at-risk industries and with connection to retail, which would be tourism and hospitality are going to be hit particularly hard by this plunge. Recovery could even take up to 36 months and with its chance still being afar, unemployment will expect to surge. The gradual reopening of markets is clearly now the only hope.