A View of Commercial Sectors Through the Coronavirus Lens

NAR releases first-quarter member survey data and 12-month forecast

Businesses are assessing how the coronavirus pandemic has affected their industries so far and how it may shape the near future. Commercial real estate professionals can find early answers in the National Association of REALTORS®' latest Commercial Real Estate Trends and Outlook Report, released in April. The analysis is based on NAR commercial members’ responses to a survey about their transactions in Q1 2020 and a comparison of results with Q1 2019 data. In addition, the report forecasts the direction of commercial real estate sectors for the next 12 months.

Commercial real estate sales and new leasing volume declined by 1% and 2% respectively, compared with Q1 2019. However, commercial prices rose modestly on a year-over-year basis. Over the next 12 months, we expect multifamily and industrial property demand to increase, while retail and office property demand will likely decline.

Rate of Price Growth Slows

While dollar sales volume fell, commercial prices rose nearly 1% in markets where NAR commercial members are active. The rate of price growth nationally peaked in 2017.

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In the First Quarter: 

  • 56% of commercial members reported a year-over-year sales price increase (compared with 75% in the prior quarter)
  • 19% reported no change (9% in the prior quarter) 
  • 25% reported a decline (16% in the prior quarter)

What the Future May Bring

On average, survey respondents expect commercial market transactions to decrease in the next 12 months. Recovery in the next 12 months will depend on when the shelter-in-place directives are lifted and how many social distancing measures remain. The long-term effect on commercial markets will depend on factors such as the severity of the impact on businesses and changes businesses make to prepare financially for another health crisis.

Demand For Some Sectors Strong

Two commercial real estate sectors will see strong demand and rent growth: multifamily and industrial. Certainly, the multifamily market is feeling the effects of job loss brought on by COVID-19 precautions, as laid-off workers in industries such as food service, housekeeping, and personal care are more likely to be renters than workers in other occupations.

But renters still need homes, and the large but temporary loss of jobs will slow the plans of some who are trying to put aside money for a down payment on a home. As a result of this factor and changing demographics, demand for multifamily properties, especially class B and C, will likely increase, along with rents, in the next 12 months.



  • 43% Percentage of REALTORS® who expect a decline in their commercial transactions
  • 3% Average decline in sales expected in the next 12 months


  • 56% Percentage of REALTORS® who expect prices to decline
  • 5% Average price decrease expected in the next 12 months

Lease Volume

  • 46% Percentage of REALTORS® who expect a decline in new lease volume
  • 4% Average drop in lease volume expected in the next 12 months

Like multifamily, industrial property is likely to see increased demand and rents in the next 12 months. Brick-and-mortar retailers were already buffeted by rising ecommerce sales before the coronavirus outbreak. The shift toward online shopping during the stay-at-home period may change consumer buying behavior to favor ecommerce sales. Industrial warehouses that are part of the critical logistics for ecommerce will benefit from this shift.

The demand for data centers will also tend to increase given greater demand for online transactions and data security.

Waning Demand for Retail, Office

By contrast, the market for retail and office properties is likely to soften over the next 12 months. Retail sales nearly halted during the stay-at-home period as more than 47,000 retailers across the U.S. temporarily shut their doors or reduced store hours and traffic to help slow the spread of the coronavirus. This disruption could lead to a permanent shuttering of stores more severe than in 2019, when 9,350 big retailers closed. Retail operations and foot traffic in retail stores and malls could normalize, but progress could also be sluggish as shoppers avoid crowded, enclosed spaces.

Federal government and Federal Reserve measures to contain the economic fallout and keep businesses afloat will help office properties retain current tenants. However, some businesses may shutter permanently, especially those that haven’t had the resources in place to qualify for Paycheck Protection Program loans or Economic Injury Disaster Loans.

Businesses will also likely delay hiring employees because of the uncertainty of a resurgence of the coronavirus before a vaccine is developed. Leases will likely become shorter term, and businesses may opt for smaller office spaces because they don’t want to carry the rent burden if another pandemic strikes.

GDP Recovery Uncertain

NAR’s Chief Economist Lawrence Yun expects second-quarter GDP growth to be the steepest decline in U.S. history—likely more than a 15% contraction on an annualized basis. The recovery in the second half of the year will be critical and will depend on the economy’s response to the stimulus measures and the path of virus containment.


April 19-20 Flash Survey of Members

  • 67% of property managers and 37% of individual landlords said they had tenants who would have difficulty making their rent payment as a result of COVID-19. A majority said they’d be accommodating given the circumstances.
  • 66% of respondents reported buyers were delaying a home purchase for a couple of months or had stopped looking as a result of a job loss or concern about job loss.

Source: 2020 NAR Flash Survey: Economic Pulse, a weekly tracking of the coronavirus's impact on real estate


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Create is a quarterly publication for commercial practitioners, members of the National Association of REALTORS® and commercial real estate industry leaders. Members can subscribe by updating your member profile information to include commercial interests in the "Field of Business" list.

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