December 3, 2001—The National Association of Industrial and Office Properties (NAIOP) has released the results of the Fall 2001Vital Signs Survey. The survey is conducted twice a year, and polls the opinions of NAIOP’s prestigious National Forums members regarding issues affecting the office and industrial real estate market. A total of 230 members responded to the Vital Signs Survey in early September. After the 9/11 tragedies, the members were re-polled on selected questions to see how their opinions on the economy and capital markets had been altered.
Some of the highlights include:
- Economic recession is a reality: After 9/11, 85 percent of the respondents feel the nation is in recession—double the proportion of early September. In the Spring, less than a third of the members detected an outright economic downturn.
- The downturn is not as apparent on the local level. Only 43 percent of the respondents feel their local economy is in recession, half the national rate. This is more then double the pre-9/11 level, however. The biggest disparity is in the South Central/Texas region where all members think the nation is in recession, but only 30 percent think their local economy is contracting.
The following observations about industrial and office real estate relate to the early September survey responses, and were not re-polled after September 11; therefore they do not reflect any shifts in opinion that may have occurred after the terrorist attacks.
- Boxes still in, switches still out. Warehouse/distribution maintained its position as having the best development potential, telecom hotels the least. Although low, R&D/Flex is generally more positive than office; neither CBDs nor suburbs look particularly promising.
- Investment is more promising than development. The investment potential of all product types ranks higher than the development potential. Most respondents feel development in their local markets won’t re-accelerate until late 2002 or early 2003.
- Office rents will underperform industrial. Nearly three fifths of the respondents feel industrial rents have stayed flat since the Spring, and over two thirds expect them to remain level for the next six months. About 30 percent report and expect a drop in rents. In office, three fifth of the respondents report a rent drop, and half expect a further decrease.
- Smaller tenants are the most active. Tenants remain more active than build-to-suits by three to two in industrial, and three to one in office. However, build-to-suits have picked up their share since the Spring. The most active industrial prospects are in the 5,000 to 50,000 sq. ft. range, office is less than 20,000 sq. ft.
The complete survey is available from NAIOP.
