Commercial Rent Collection Holds Steady from April to May, Industrial Leads Pack, Says Nareit

by Taylor Williams

WASHINGTON, D.C. — A survey of U.S. REITs representing six different asset classes found that across the board, rent collection rates for the months of April and May displayed minimal variance. Washington, D.C.-based Nareit, which provides research and data for these institutional firms, conducted the survey.

The survey highlighted rent collection data for 43 REITs in the industrial, multifamily, office, healthcare and retail sectors, with separate data for two sub-categories of retail. The sample represents 63 percent of total equity market capitalization of all publicly traded REITs for those property sectors, based on the FTSE Nareit All REITs Index.

“The survey results suggest that while REIT tenants in some hard-hit sectors continue to struggle, their ability to pay May rents didn’t appreciably worsen despite the widespread business closings in April,” said John Worth, Nareit’s executive vice president of research and investor outreach.

Industrial REITs posted the strongest rent collection rates for both April and May, respectively receiving 98.6 percent and 95.7 percent of rents owed in those months. Growth in e-commerce sales during the COVID-19 outbreak lies at the heart of industrial sector’s pack-leading performance.

Total U.S. e-commerce sales rose by 49 percent from March of this year to April, according to Tech Crunch, a publication covering tech startup firms. April was the first full month in which nearly all states issued some sort of shelter-in-place order. Elevated online shopping activity has kept many industrial users operating at full capacity throughout the pandemic to deliver essential goods and services. For REITs, this activity has translated to heightened demand for storage and distribution space.

Multifamily REITs took the silver medal in both months with collection rates of 94.3 percent and 94.7 percent, respectively. Along with those of office REITs, which collected 93.3 percent of April and 92.1 percent of May rents, rates for multifamily REITs showed little fluctuation from month to month.


John Worth, Nareit

“The continued ability of apartment renters to meet their rent obligations reflects both the federal government stimulus, including enhanced unemployment benefits, and the fact that REIT apartments generally house individuals who are less likely to have been affected by layoffs to date during this crisis,” Worth said.

REITs in the retail sector posted the lowest rent collection rates in both April and May by a considerable margin relative to other property types. Along with hospitality, this sector been impacted most severely by the business closures brought on by the pandemic.

The survey polled retail REITs that specialize in freestanding assets, with the numbers separated from those of traditional shopping centers. REITs in the freestanding retail space managed to secure more than 70 percent of their rent payments in both months, while shopping center REITs collected less than 50 percent of their rents in April and May. The low level of survey participation among institutional owners of regional malls did not warrant the release of those results, Nareit said.

The disparity between collection rates of freestanding retail properties and shopping centers has prompted a shift in retail investment dynamics. With traditional, multi-tenant centers facing cash-flow concerns, investors are targeting more single-tenant properties that are leased to users with strong credit and national brand recognition.

Nareit will conduct another survey at the beginning of June to assess rent collections for the month.

Taylor Williams

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