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PS Business Parks, Inc. PSB has collected 95% of its August billed rent, inclusive of repayments of amounts that had previously been deferred, as of Aug 31, 2020. This compares with rent collections of 93% for July. The company’s pace of rent collections in August outdid its experience in each of the prior months, starting from April and through July.
The percentage of rent collected for August comprised 94%, 95% and 97% of rental receipts for its industrial, flex and office properties, respectively. The company’s level of outstanding rents for industrial, flex and office properties stood at 4%, 5% and 1%, respectively.
The company also noted that weighted average occupancy for the Same Park portfolio (defined as assets acquired prior to Jan 1, 2018) was 92.3% and 92.5%, respectively, during the two- and eight-month period ended Aug 31, 2020.
Apart from the fast adoption of e-commerce, the industrial real estate space is anticipated to gain traction over the long run from a likely rise in the inventory levels of companies as a precaution for any supply-chain disruptions.This, in turn, will likely keep supporting the landlords having industrial properties like PS Business Parks, Prologis PLD, Duke Realty Corp. DRE and Terreno Realty Corporation TRNO and help enjoy a favorable market environment over the long term.
However, industrial real estate fundamentals are more resilient than other asset categories yet are not immune to the pandemic. The adverse impact on the economy will likely affect demand for space in the near term. Also, demand for office space continues to suffer due to the health crisis and social-distancing measures. Thus, PS Business Parks’ pricing power will continue being affected in the near term.
Moreover, with PS Business Parks’ portfolio having a concentration of small- and mid-size customers, it is more susceptible to the pandemic’s adverse impact. Many of its customers are bearing the brunt.
Through Aug 31, 2020, 10.7% of the company’s customers, based on total rental income, had been granted rent relief in the form of rent deferral and/or abatement, with open rent relief requests from approximately 1% of customers as of the same date.
Given the rise in COVID-19 infection rates and possibilities of the reinstitution of restrictions, the challenging environment will likely persist in the near term. Issues related to rent collections with deferrals, abatements and defaults are expected to prevail.
Nevertheless, PS Business Parks’ diversified portfolio, asset-repositioning moves, decent balance-sheet strength and ample liquidity position it well to withstand cash-flow woes and sail through the current crisis.
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