The economic disruptions brought about by the COVID-19 pandemic have resulted in a sharp downturn in the commercial real estate market, a survey of the industry’s top executives has confirmed.

The Real Estate Roundtable’s 2020 Q2 Economic Sentiment Index registered a score of 38, a 14-point from the first quarter score of 52, indicating a huge plunge in market conditions.

The report measured the views of chief executive officers, presidents, and other top commercial real estate industry executives, with any score above 50 viewed as positive.

The results come as the US continues to grapple with the coronavirus outbreak. With the pandemic wreaking havoc on all industries, Real Estate Roundtable president and chief executive officer Jeffrey DeBoer said the commercial real estate industry has experienced a sudden onset of economic disruptions as job losses and business shutdowns continue to mount.

“The economic damage to commercial real estate has been particularly harmful for the retail and lodging sectors of the industry,” he said. “Although our Q2 survey results show there is hope for improved conditions within the next year, there are significant concerns that other sectors of the industry could be dragged down if jobs don’t rebound and government assistance tapers off.”

The report predicts an improvement in market conditions by 2021, but this will depend on the return of jobs and the ability to safely reopen businesses. Many respondents were concerned about tenants not being able to meet their rental obligations due to unemployment.

“The fear is that business and residential tenants may be suddenly unable to pay rent beyond the sectors already impacted and struggling to come back,” DeBoer said.

Respondents also reported that stay-at-home orders impaired their ability to accurately value commercial real estate assets, which has slowed real estate transactions.

Survey participants also saw plenty of equity capital on the sidelines but there was an unwillingness to invest in the market without price discovery.

However, respondents were generally optimistic about the future.

Although the report’s Q2 Current Condition Index dropped 13 points from Q1’s score of 55, the Q2 Future Conditions Index rose 12 points to 62 compared to Q1’s 50.

The 49-point disparity between the Q2 Current Index (13) and Future Index (62) is the most significant difference registered by the survey in its 12-year history, indicating a strong positive outlook once the pandemic has run its course.

The next highest disparity occurred in Q1 2009, when the difference between current and future indices registered 40 points during the global financial crisis.

DeBoer said his organization has continues to support the government’s efforts to soften the pandemic’s economic impact but has urged the Congress to create a temporary assistance program to help residential and commercial tenants meet their rent obligations.

“Such a program would help people and businesses cope with the current economic downturn,” he said.  “It would help building owners maintain their workforce that is necessary to ensure that visitors to buildings are safe and healthy… [and] ease pressure on financial institutions and local governments.”