Not surprisingly, this month’s NAIOP Maryland survey painted the image of an industry facing challenges and uncertainty but holding hope that conditions will improve before too long. 

Cash-flow problems created by the COVID-19 crisis are impacting Maryland’s commercial real estate industry in multiple ways.

Developers who responded to the survey say on average 79 percent of rent was received on time in April, down from an industry-wide average of 92 percent during normal months.  Two respondents noted that on-time rent payment was especially low among retail tenants – down to 60 to 65 percent.  At one developer’s properties, 20 percent of tenants had requested rent relief. Developers, however, were evenly split on whether they expect on-time rent payment to improve or deteriorate in May.

Among developers, 85.7 percent are seeing a significant decrease in business transactions and 61 percent have postponed investment purchases or construction decisions.  While most responding developers expect to see second quarter revenues drop 20-30 percent, some said revenue loss could be less than 1 percent.

Among brokers, the business environment in April looked even more challenging.

“Leasing velocity has screeched to a halt,” one broker said.

Overall, 90 percent of brokers reported seeing a significant decrease in business transactions and 87 percent have postponed investment purchases or construction decisions.  Brokers estimated their Q2 revenue losses will range from 25 percent to 100 percent.

“Current cash flows and future revenues are negatively impacted for most businesses and it is unclear when things will return to normal. This makes it hard for companies to fulfill their current rent obligations let alone make plans for taking additional space,” one broker said.

Meanwhile, companies are contending with a variety of other challenges, including an inability to meet with clients or show properties, delays in getting drawings approved, delays or shutdowns at construction sites, added expenses for protective gear and sanitizing products, and efficiency losses due to the switch to telework.

“Moving everyone from a physical to a virtual space has impacts on productivity and mental health,” one respondent said.

Various measures could help reinvigorate the commercial real estate industry, including tax relief, foreclosure forbearance, reductions in government regulations, efforts by lenders to support small businesses, and a phased return to more normal work that generates confidence that the workplace is safe, according to respondents.