Q2 Rent Collections Were Strong Across Sectors. Longer-Term Results Will Vary
As a temperature check on the health of commercial property sectors, Marcus & Millichap analyzed the latest round of earnings releases from REITs for data on rent collections during the second quarter. On the whole, collections for Q2 remained robust, but Marcus & Millichap points out that for Q3 and beyond, results will begin to vary along with the levels of pressure facing each sector.
For Q2, rent collections from healthcare, multifamily, industrial and office tenants all exceeded 95%, according to Marcus & Millichap’s report. “Medical office and industrial could continue to outperform other types in the third quarter, while the expiration of stimulus will weigh more heavily on multifamily and office collections,” the report states.
Given that elective surgeries as well as most in-person office visits were prohibited at the height of the pandemic lockdowns, medical office buildings faced a pandemic hurdle of their own. Yet, Marcus & Millichap reports that MOBs had the highest Q2 rent collection rate of any sector: an unassailable 99.8%.
Although both office and multifamily posted higher Q2 rent collection rates than industrial, Marcus & Millichap forecasts continuing strength for industrial while anticipating potential challenges for office and multifamily. Among office tenants, “Some firms could downsize to offset revenue lost during the economic disruption, while others may shift operations to remote working,” the report states.
Buoying collections for multifamily properties in Q2 was the $600 weekly federal unemployment benefit, which helped many jobless tenants make rent. “However, collections could drop in the third quarter as the federal benefit was reduced and more tenants could struggle to meet dues with less support,” according to Marcus & Millichap.
The report notes that single-tenant retail performance has varied by concept, with experience-based tenants “facing greater challenges than necessity-based shops,” the report states. “Restaurants and drugstores among other types will recover faster than gyms and theaters, which need to reopen more gradually.”
Similarly, the impact to multi-tenant retail varies widely, with centers anchored by essential retailers—such as supermarkets—more resilient than malls and small retailers. When all is said and done for Q3, “retail collections could continue to trail other types as consumer spending may moderate with less government support,” the report states.
For comments, questions or concerns, please contact Paul Bubny
- ◦Economy
- ◦Lease
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