1st Quarter 2020 - blauberg

Industrial Trends

The pandemic is evolving every day and its ultimate impact is not yet clear. Similar to the Spanish flu in 1918, this virus has generated a shockwave that has halted the global economy. Each state as well as the White House administration have been working diligently to ‘flatten the curve’ by social distancing, stay at-home measures, among others. Medical and other first responders have been risking their lives each day to continue the supply chain and keep people healthy. To stay up to date click on the CDC link: https://www.cdc.gov/coronavirus/2019-ncov/index.html

On the bright side, the coronavirus has enhanced the importance of the logistics industry, but that benefit may be offset by the downside of a likely recession. There is no question, the global supply chain has been disrupted and probably will need at least a few quarters to recover.
The coronavirus pandemic will also likely stifle rent growth and investment for the immediate future quarters.
Rent growth has been outstanding, and averaged close to 7% annually over the last five years.
Sales volume peaked last year, with roughly $1.4 billion exchanged. Both of these numbers will probably decline in 2020, as the uncertainty surrounding the coronavirus and the prospect of a global recession are not likely to inspire landlords or investors to make aggressive plays.

Trade volumes were down in January and February due to the Chinese New Year and their ports being closed an extended period due to the coronavirus.
Activity started to recover in late March however as this was written (4/30/20), many 3PLs were starting to see a slow down into the 2Q20.

Slow and steady growth has been a theme of the metro’s performance in this cycle.
Retail demand will certainly take a hit due to the coronavirus. Beyond the economic implications that typically come with a recession, gathering places, such as brick-and-mortar retail locations face an uncertain future over to the extent they will even be allowed to operate, and how long restrictions will be in place. Although retaining its existing tenant base will be a challenge, Northern New Jersey fortunately does not have to content with much supply risk. Projects underway represent less than 1% of the existing inventory.

The outlook is not particularly favorable however offices with good transportation and roadways will fair better than those that do not. Fundamental economic challenges point to limited rent growth.

Vacancies have increased since the start of last year but remain below their historical average.
Construction has ramped up in recent years and has centered on transportation hubs.
Despite local job growth lagging compared with the national rate, NJ has generated strong apartment absorption.

Downward pressure has been placed on wages and prices as a result of high unemployment and excess capacity. We are facing grocery inflation, according to statistics released by Nielsen.
The economic landscape continues to be dominated by historic declines in just about every significant category.
Despite horrible economic data, the equity market rallied at the end of the first quarter.
On top of the CARES Act, which will provide $2.3 trillion in fiscal stimulus, the Federal Reserve has expanded its balance sheet by $2.4 trillion to over $6 trillion.
Due to the CoVid-19 events and incredible amount of loss of jobs, the 2Q20 could see one of the largest dips in GDP in US history.