Barbara Denham, Economist with Reis, appears on this commercial real estate show segment to discuss trends and performance in the industrial property sector in the United States. Topics include existing supply and delivery expectations, rental rates, and cap rates. She notes that deliveries keep hitting new highs each year, with a slowdown only perhaps coming in a couple of years. She notes that cap rates declined a touch in the prior year, but not much, from 7.6% to 7.2%. Finally, she discussed effects, or lack thereof, of economic trends and expectations.
Note that while examining the national industrial property market, it’s vital to recognize that performance indicators may differ substantially in specific regions, such as Miami.
An Industrial Real Estate Discussion: Insights and Trends
In the realm of commercial real estate, few sectors have garnered as much attention and excitement as industrial properties. The conversation surrounding this dynamic market segment often reflects broader economic trends, technological shifts, and consumer behavior. A recent discussion on America’s Commercial Real Estate Show provided valuable insights into the state of industrial real estate, shedding light on key performance indicators, market dynamics, and future prospects.
The conversation, led by show host Michael Bull, touched upon various facets of industrial real estate, from occupancy rates to rental growth, new supply, and investor sentiment. Joining the discussion were esteemed guests Barbara Denham, Senior Economist at Reis, and a prominent developer offering his perspective on the industry.
Industrial Property Occupancy and Rental Growth:
Barbara Denham kicked off the conversation by providing an overview of how industrial properties are performing across the country. Despite concerns about a slowdown earlier in the year, Denham highlighted that the industrial market had experienced robust growth, with occupancy rates remaining strong. She noted that while there was a slight deceleration in rental growth in the first two quarters, the market rebounded in the third quarter, indicating resilience and sustained demand.
New Industrial Property Supply and Development Trends:
One of the notable trends discussed was the surge in speculative construction, leading to an increase in new supply. Denham pointed out that while speculative construction levels were higher than ever before, there was still strong demand driving the market. The conversation underscored the unique dynamics of industrial development, where shorter construction timelines compared to other sectors contribute to the challenge of forecasting future supply accurately.
Industrial Property Cap Rates and Investor Interest:
Despite the influx of new supply, cap rates in the industrial sector remained relatively stable. Denham highlighted the consistent investor interest in industrial properties, leading to strong sales volume year over year. The conversation emphasized the resilience of the industrial sector, with sales volume continuing to rise, indicating sustained confidence from investors.
Regional Variances and Emerging Markets:
While the overall outlook for industrial real estate was positive, the discussion also touched upon regional variations and emerging markets. Denham highlighted the strength of markets along the coast, such as Florida, California, and Texas, where robust rent growth was observed. Additionally, the conversation shed light on emerging markets like Reno, Nevada, and parts of Pennsylvania, which presented opportunities for investors seeking greater yields in lesser-known markets.
Future Outlook and Considerations:
Looking ahead, the conversation acknowledged uncertainties surrounding factors like the ongoing trade war. While the industrial sector has thus far shown resilience, potential impacts from trade policies remained a key consideration for investors and developers. However, overall sentiment remained positive, driven by strong consumer demand and continued economic growth.
In conclusion, the conversation provided valuable insights into the state of the industrial real estate market nationally, highlighting its resilience, sustained demand, and opportunities for investors. Despite challenges and uncertainties, industrial properties continue to be a favored asset class, offering stability and growth potential in an ever-evolving commercial real estate landscape. As the conversation on industrial real estate continues, stakeholders remain vigilant, ready to adapt to changing market dynamics and seize emerging opportunities.