It was the darling of commercial real estate owners and brokers staring into the abyss of the early pandemic, but the market for industrial real estate will see a significant cooling-off this quarter, a new forecast from NAIOP predicts.

Industrial net absorption is forecast to decline to negative 141 million square feet in the third quarter of this year nation-wide. Net absorption is forecast to remain negative after the third quarter, with negative absorption of approximately 72 million square feet in fourth quarter of 2020 and 27 million square feet in the first quarter of 2021. The forecast calls for a return to positive net absorption by the second quarter of 2021. Growth in industrial absorption consistent with pre-pandemic trends, however, is not forecast to resume until first quarter 2022.

“The U.S. macroeconomic landscape has deteriorated significantly. The Q2 2020 contraction in Gross Domestic Product, if annualized, was nearly 33 percent, rivaling the early years of the Great Depression. The yield curve, the difference between long- and short-term interest rates and a bellwether of forward-looking expectations of economic growth, has been below 50 basis points, or negative, since January 2019. Moreover, real-time indicators of economic activity, as well as academic forecasts of growth, highlight the headwinds currently facing the U.S. economy,” a statement from the authors of the NAIOP Industrial Space Demand Forecast, Manhattan College economics professor Hany Guirguis and New York University real estate professor Timothy Savage, said.

According to the report, although the pandemic will likely increase demand for e-commerce, it is unlikely that industrial real estate will be completely immune from the effects of the coronavirus-induced recession. These include significant disruptions to supply chains and global trade, reduced manufacturing and construction activity, and widespread store closures among brick-and-mortar retailers.

“E-commerce will drive long-term growth in industrial real estate,” NAIOP President and CEO Thomas J. Bisacquino said in a statement “But it is only one piece of the puzzle. COVID is a natural disaster that significantly affected consumer demand and supply chains. When the crisis ends, we anticipate that the rebound will be faster than in prior economic slowdowns.”