Ian Ritter is Online Content Manager at GRS Group
Industrial real estate, such as warehouses and distribution centers aren’t considered the sexiest commercial real estate product types in which to invest.
They don’t have big flashy department stores or other well-know consumer meccas anchoring them like shopping centers. They’re not pretty, like large, glassy office towers. And they certainly don’t have the hot investment cache that currently surrounds multifamily assets.
But to completely overlook industrial real estate right now as an investment type is probably a decision you wouldn’t want to make.
The industrial sector’s growing absorption rates and sinking vacancy rates, are actually leading to a demand in development for these commercial real estate assets, according to a Cassidy Turley fourth-quarter report . Vacancy rates, which were close to 10 percent in 2010, were down to 8.2 percent by the end of last year. This has, in part, sparked major demand for more space. There is currently 71.1 million square feet of industrial space under construction, an 85 percent increase from the same year-ago period.
CBRE concurs. According to a recent industrial report by the firm (you must register to download the full thing), The industrial sector enjoyed its best year in 2013 since 2007. Mainly this is due to a rebound in manufacturing in the United States and a major boost in e-commerce growth that has lead to a demand for space. The firm also points to spec construction returning to the sector.
And one aspect of this that can’t be ignored is the widening of the Panama Canal, projected for completion some time in 2015. This is expected by industry experts, including K.C. Conway, the chief economist at Colliers international to improve the capacity at many U.S. ports on the East Coast, including Baltimore; Charleston, S.C.; Miami and Norfolk, Va., according to this GlobeSt.com article. That will, in turn, through the trucking industry, benefit industrial areas in Atlanta; Dallas; Indianapolis; and Kansas City, Mo.
It seems as though several sectors of commercial real estate are doing well around the country right now. Industrial real estate, though it doesn’t get most of the dramatic headlines, should be counted in as well.