Nick DePaolera, sales associate in Parsippany at commercial real estate agency NAI James E. Hanson, says many New Jersey developers and investors have hit the pause button due to disruptions in the manufacturing supply chain caused by the COVID-19 pandemic.
Governmental and health authorities have ordered residents to stay home and to work from home. As a result, the economy has been upended. Many manufacturing companies have reduced operations as their supply chains have been disrupted.
“A lot of these distributors and logistical operations who are receiving imported goods are obviously being hit hard,” DePaolera told NJBIZ on Wednesday. “Even if consumer demand is still there, getting these goods to the consumer is the issue.”
“If I am a distributor in the United States and I have my manufacturing operations in China, it’s obviously been very difficult to get my imported goods into the United States,” he said. “I have a number of different clients who are in that industry. Right now their deliverable items are being held up.”
DePaolera relayed this assessment based on conversations with his clients.
“Until everyone has a better handle on this pandemic and there is a vaccine for it and the number of people being affected by it goes down or is mitigated, it is too early to tell,” he said.
Even so, the American consumer base is still healthy despite the COVID-19 pandemic.
“I think it is important to know foreign money is still looking to get into the United States and invested into the commercial real estate sector,” he said.
He thinks industrial is one asset class within real estate that will benefit in the long run. Supply chains exist to avoid disruption during manufacturing, distribution, and the point of sale.
“Depending on how long this pandemic lasts, if they are not able to generate income for three months, five months, six months, or a year, that is a major issue,” he said. “Those particular companies will have to find a way to get through the short-term battle. If they are able to, I think a lot of these operators and companies would learn from this experience and say ‘we would benefit from having manufacturing in the United States.’ ”
Developers and investors have a hard time investing $20 million into a new deal during uncertain times such as the COVID-19 pandemic because that money is needed to pay their employees, he said. With uncertainty about when the pandemic will end, these companies are hitting the pause button on the industrial front.
Central and North New Jersey have a commercial industrial vacancy rate of 2.6 percent as of Wednesday. The demand on the industrial sector is historically low, he said.
“The most important thing for all companies is cash flow,” DePaolera said. “If you are not able to get cash flow, your products are not getting to consumers. That is a major issue. You are going to have to weather that storm for the time being. Assuming you are able, I do think the economy will rebound well.”