The Industrial Sector is Racing to the Forefront
Industrial real estate may not be the most talked about sector, but it has been experiencing a resurgence of interest as demand rises. Think about it – industrial properties are indispensable. Every consumer good goes through a warehouse at some point, and while e-commerce has negatively affected retail it has very positively affected industrial.
According to NCREIF Property Index, industrial is expected to generate returns of 10.3 percent this year, well ahead of the 6 percent returns expected in both office and apartments, and 2.9 percent for retail. Gone are the days where industrial real estate was simply a manufacturing space; e-commerce and logistics are driving the boom and there isn’t an end in sight.
The Urban Land Institute’s Real Estate Economic Forecast for Spring 2019 projected the industrial/warehouse vacancy rate around 7 percent, which is well below its 20-year average of 10.2 percent. Developers and investors would be wise to key in on the industrial sector, whether it’s to repurpose an existing building with a great location or develop a new industrial property.
Location is the Most Important Factor
As e-commerce continues to expand into other sectors, including grocery, vehicles and pharmaceuticals, the need for storage and distribution space will exponentially increase. In addition to that, the location of the industrial building will be of utmost importance. Consumers in urban locations are now expecting same-day or two-hour delivery, meaning that the high-quality industrial space in prime high population locations will carry the greatest value in the industrial sector.
If an industrial building in a densely populated urban area is out of reach for your investment strategy or budget, consider a property located near rail, airports or inland rivers. Port markets coast to coast are a target for distribution companies, and the Port of Greater Baton Rouge is the tenth largest port in the United States in terms of tonnage shipped.
The steady demand for industrial space across the United States continues to grow, and the current inventory is extremely limited. Supply chains are changing to satisfy consumer requirements for expedited service, and the e-commerce boom is just beginning.