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Recovering From COVID-19

By: Sibley Fleming

SIOR Second Quarter COVID-19 Market Update

As more people are vaccinated, travel restrictions are lifted and the American economy is roaring back to life, leaving industrial real estate king and office real estate in an uncomfortable transition. From Chicago and New York to Memphis and Philadelphia, industry pros share their learnings from the pandemic and optimism for the future.

Steve Connolly, SIOR, executive vice president and partner with NAI Hiffman in Chicago, says leading into the pandemic the industrial market was so strong with sales and new developments that many worried the great run had come to an end. As April and May rolled around, industrial rent collections were solid. After the initial shock, the message to brokers was to find deals with developers looking for opportunities in a capital-rich environment.

That approach for Connolly led to a great year finding new opportunities that closed between the end of 2020 and early 2021. Buildings that had good activity pre-pandemic continued to lease-up. In June, for example, Connolly’s team was in negotiation for a 575,000 square foot, two-building industrial project on behalf of Bridge Development and Cabot Properties. Negotiation for the last-mile, in-fill development in Cicero, Ill. progressed accordingly with no interruption. “This was generally the case for industrial development projects in Chicago during 2020.”

Connolly says he found that strong companies and developers looked at it as a moment in time and continued to grow. New companies with no prior industrial background are entering the Chicago industrial market, driving up prices and creating more development opportunities in areas farther out from the urban core that might not have been considered five years ago. “There's a lot of competition and maybe you don't want to be that guy that overpaid for a site that's closer in,” he explains. Connolly also believes the shift to working from home is temporary, and that once that the country reopens, remote working will allow for flexibility and serve to attract top talent.

New York, in contrast, has seen deals become more competitive. “Things are getting a little bit more aggressive on deals and getting a little bit more comfortable,” says Jason Gold, investment broker for New York City-based Ariel Property Advisors responsible for business development in the Bronx. Underwriters have also become more conservative, requiring more equity in deals.

In the first quarter, Ariel has signed on a dozen deals in the Bronx alone with industrial, warehouse, and even some retail properties coming back to useful life.

Gold says in the past few months he’s seen film studio space and ghost kitchens (restaurants that offer delivery-only) become a big play around Silvercup Studios, the city’s most iconic production facility. Investors looking for industrial and warehouse space. “It's not just that ‘Amazon effect,’ which is definitely still in play,” Gold notes.


Landon Williams, SIOR, a senior vice president in Cushman & Wakefield’s Capital Markets group in Memphis, Tenn., says many things came together in the first months of the pandemic to make investors press the pause button, stalling deal volume. Williams was in the sports business during the Great Recession so the pandemic served as his cold open to a major market crash in real estate.

Lessons learned were simple and lasting: back to basics. That meant working around COVID-19 restrictions and getting in front of clients more frequently.

“We ramped up our communication efforts by ten or a hundredfold,” Williams  says. Communications shared information in the form of market updates and trends, sentiment, real-time feedback, solutions to problems. and “a lot more conversations that didn't necessarily have a transaction at the end of the conversation.”

Being focused, being humble, and being aware of my surroundings is a lot more prevalent in my business models now.

The overnight pivot to working from home is a badge of honor for Corporate America, he believes, but Williams also doubts the new remote-only order will endure, given the longer-term need to measure productivity. Meantime, Connolly is optimistic about the second half of 2021 given the growing vaccination rate and overall “citizen optimism.”


According to the CBRE industrial market 2021 outlook for the U.S.1—because industrial portfolios are institutionally owned—investors wishing to expand into the segment will look toward Class-B and C light-industrial buildings in urban markets with below-average vacancy rates, including the New York Tri-State area, Chicago, Northern and Southern California, and Miami. The report also singled out Class-A buildings in emerging markets near logistics hubs and growing population centers such as Salt Lake City; Greenville-Spartanburg, S.C.; Phoenix; Las Vegas; El Paso, Texas; and Florida’s I-4 Corridor.

CBRE researchers anticipate that another 300 million square feet of industrial space will be absorbed on the back of e-commerce alone. However, due to the need to research and develop, produce, and store COVID-19 vaccines, the explosive growth of life sciences and cold storage have also thrived in the pandemic and are expected to continue.

Bona Allen, CFO of Atlanta-based Kajima Building and Design Group, whose primary focus is designing and building industrial and manufacturing, says his company’s revenues in 2020 were up significantly. Revenues rose from $380 million in 2018, followed by a dip to $202 million in 2019 due to deal delays, and then shot up to $420 million in 2020. The numbers are even more interesting when comparing March 2019 with March 2020 “value under construction” combined with “value completed in the last six months”: The total for March 2019 was $567 million versus $943 million for March 2020.

“Our volume expanded rapidly because of our expertise in critical areas,” Allen says. For example, KDB Group provided GC services on a 1 million square feet spec distribution facility in Shepherdsville, Ky., that will be used as a massive COVID-19 vaccine distribution center with a 15,000-square-foot refrigerator and an equal-sized sub-zero freezer. The whole project was contracted by the CDC and will  be utilized by the McKesson Corporation, according to local news reports.

Another project that reflects the demands of COVID-19 on industrial space is KDB’s current design-build work on a 60,000 square foot expansion of the Fujifilm Manufacturing facility in Morrisville, S.C., which is almost entirely a “clean room” facility where Fujifilm will be producing part of the vaccine.


William “Bill” Gladstone, SIOR, of the Bill Gladstone Group, a part of NAI CUR, the largest exclusively industrial commercial real estate firm in Central Pennsylvania, says when the virus first struck, new business came to a standstill and the silence from lack of phones ringing was “eerie.” Gladstone also had five assistants, three of whom were dedicated to marketing.

“We started brainstorming and tried to find new ways to get out there and be with people,” Gladstone says. The team started producing videos for YouTube and developed postcard campaigns that they sent to target audiences. “It helped keep everybody on my team focused.” A year later, Gladstone is now investing in two billboards to advertise himself and his team.

When Gladstone returned to the office following the eight-week lockdown, he says the phones started ringing again—and they haven’t stopped. He quickly learned, however, that office leasing would not create a lot of business going forward. These days with the market open, he says investors are looking for small office buildings, which have increased in value. “Any small commercial buildings—freestanding office buildings, churches, investment properties, multifamily land with sewer and water so people can build apartments—does very well,” he says.

But Gladstone’s biggest lesson: Be humble because you never know when your feet are going to get your feet knocked out from underneath you. “Being focused, being humble, and being aware of my surroundings is a lot more prevalent in my business models now.”


Steve Connolly, SIOR

Bill Gladstone, SIOR

Landon Williams, SIOR


Media Contact
Alexis Fermanis SIOR Director of Communications
Sibley Fleming
Sibley Fleming

Sibley Fleming is an Atlanta-based freelance writer, author, and editor. Contact her at csibleyfleming@gmail.com.