The industrial sector in real estate faces some significant forces in the upcoming years. Changes in ownership and investors will continue to impact the industrial space for lease. Retailers and big box warehouses are expanding their distribution center footprints throughout the United States. And, ecommerce continues to expand into the “last mile” landscape. In addition, the sector is attracting more interest from foreign investors. These changes will reshape the industrial development.
Due to several large-scale portfolio transactions during the last several years, the overall ownership for distribution and industrial properties in the U.S. has experienced a considerable shift towards institutionalization. As a result, an increasing number of Class A distribution center and industrial properties are held by increasingly fewer owners.
The evolution of the industrial sector towards institutionalization is a result of a multitude of global forces. The sector has benefited from a growing base of investors willing to allocate more capital for investment in non-traditional assets such as commercial real estate (CRE). This is especially true as the U.S. industrial sector has been offering wider spreads in contrast to lower risk investments like U.S. government bonds.
In addition, foreign investment in industrial real estate is expected to grow. Research shows that offshore-driven capital produced its largest participation in industrial sales last year. Singapore has surfaced as a key investor in industrial real estate. This is driven, in part, by the acquisition of IndCor Properties by Global Logistics Properties and its contract to acquire Industrial Income Trust (IIT). With these two acquisitions, Singapore-based Global Logistics Properties has emerged as the second-largest distribution center property owner in the United States. This trend is expected to continue with buyers coming from Canada, Europe, the Middle East, and Asia.
Other trends such as the drive towards maximizing ecommerce fulfillment centers will impact the industrial real estate market. No longer are distribution center investment and development relatively straightforward. The complexity of the global supply chain has increased as have the needs of industrial property users and investors.
If you are looking for industrial space for lease, contact our team at Menlo Commercial Real Estate.