Industrial sector has been the most sought after property type for the real estate investment community over the past few years and indications point to that continuing in 2018. Industrial property demand has always been a function of economic growth. Real estate industry analysis results predict that for every USD 1 billion additional e-commerce sales, 1.25 million square feet of distribution space is required. This means that at least another 85 million square feet of distribution space will shortly be demanded. Therefore, despite GDP growth hovering around 2% for the past seven years, industrial real estate will continue to outperform due to e-commerce driving the market.
The current trends that are observable indicate that 2018 will be a year driven by transaction volume.
- Transaction volumes are continuously rising and total industrial volume has seen a stable increase till 2015 where it reached the highest transaction volume ever. Then in 2016 it dipped but rose in 2017 to the second highest transaction volume ever. Northeastern region is significant as there has been year over year growth of 7% attributable to a combination of single asset sales and larger portfolio transactions such as sale of The Hampshire Companies’ northern New Jersey portfolio as well as Duke’s purchase.
- Industrial pricing has remained strong. Investors have flocked to the industrial sector because of its impressive year over year rent growth which hovers around 8% to 11%. Surplus capital and increasing demand has driven pricing for Class A distribution space in core locations to 3.9%- 4.6% cap rate range.
- Funding deficits seem to be largest amongst investors despite foreign investments up by approximately 30%. Institutional industrial allocations will be surpassing retail allocations over the next year, as investors increasingly meet their retail targets with industrial products. There is a large inbound queue among fund managers and it is clear that the under allocation has been amplifying demand for industrial product.
- The rising GDP and growth in manufacturing sector are continuously increasing the demand for industrial real estate. Market research reports for real estate indicate that this growth has largely been due to the explosion of e-commerce that has increased the need for industrial real estate. Today there is a huge requirement for warehousing and other related industrial real estate. Even product diversification and variations need to be maintained which requires industrial real estate.
All these factors when considered present the conclusion that 2018 and subsequent years will see higher transaction volumes as investors will continue seeking bright future prospects. In addition experts also expect larger portfolio sales and recapitalizations to be a significant trend in 2018. The continuous growth of e-commerce will further the demand for industrial real estate and the growing concerns relating to the environment are also a contributing factor as they lead to demand for large single efficient units rather than multiple small ones. Real estate in its single sense is developing but multiple studies showcased industrial real estate is the key growth driver.
Key Topics Covered in the Report
Real Estate Market Research Reports
Real Estate Industry Analysis
Market Research Reports for Real Estate
Real Estate Industry Research Report
Real Estate Market Research Reports Consulting
Real Estate Business Review
Real Estate Industry Research and Market Reports
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Ankur Gupta, Head Marketing & Communications