Rent Collection High In Most Asset Types, Marcus & Millichap Finds

While in some sectors more than 95 percent of tenants are meeting their rent obligations, some retail assets continue to struggle.
Image by Adam Derewecki via Pixabay.com

Despite the economic uncertainty and general upheaval due to the COVID-19 pandemic, the majority of commercial real estate tenants were able to meet their rent obligations during the second quarter, according to Marcus & Millichap’s latest report on rent collections.


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While the single-tenant and multi-tenant retail sectors struggled, collections in the medical office, multifamily, office and industrial sectors all surpassed 95 percent. In the pandemic environment, the disparity in rent collection levels across the sectors is neither new nor fleeting. “Through the end of the year, commercial real estate will perform with significant variation,” Hessam Nadji, president & CEO, Marcus & Millichap, told Commercial Property Executive.

The medical office building sector led the commercial real estate industry, with rent collections reaching 99.8 percent, in spite of some tenants having faced challenges amid the banning of elective procedures. In the multifamily sector, 97 percent of tenants were able to meet their rent obligations, buoyed by the $600 weekly federal unemployment benefit that lasted through the entire second quarter.

Hessam Nadji
Hessam Nadji, President & CEO, Marcus & Millichap. Image courtesy of Marcus & Millichap

While the office sector could not avoid obstacles, a notable 96.1 percent of tenants were still able to meet their rent obligations. “Rent collections for office properties came in strong despite the widespread shift to working from home for many people and the economic disruption straining the bottom line for a lot of companies,” Nadji said. And for the industrial sector, which continues to be strengthened by significant e-commerce activity, rent collections came in at 95.8 percent.

Rent collections in the retail sector were a mixed bag in the second quarter. Collections in the single-tenant retail sector decreased, with 86.8 percent of tenants meeting their rent obligations. And in the multi-tenant retail sector, property owners reported rent collections at just 74.3 percent. Essential retail tenants at single-tenant properties and shopping centers kept retail above water.

Rockier road ahead—for some

Marcus & Millichap anticipates that while the medical office and industrial sectors will likely continue to lead the commercial real estate industry in collections in the third quarter, other sectors are in for turbulence.

“Industrial and medical office properties will be among the top performers as the acceleration of e-commerce creates greater need for warehouse space and pent-up demand for elective procedures drives doctor visits,” Nadji noted. Multifamily, however, may not be able to sustain its high level of collections, given that the $600 unemployment benefit has been reduced. “Apartment rent collections have surpassed expectations over the past several months during the crisis, but additional progress could hinge on the outcome of federal legislation supporting unemployed workers,” he added.

Single-tenant retail may experience a speedy recovery, with quick-service restaurants, auto parts stores, drugstores and other necessity-based retailers having adapted operations during the health crisis. However, gyms, theaters and other experience-based retailers in single-tenant locations have notable hurdles to overcome before returning to normal operations. Multi-tenant retail is poised to hold its position as the most challenged in rent collections. As Nadji explained, “Multi-tenant retail centers without necessity-based tenants will be the most negatively impacted; however, job growth and sustained economic momentum since bottoming out in April are positive signals for continued improvement.”

Read the full report on Marcus & Millichap’s website.