Nearly a third (31%) of those surveyed predict the industrial property type will outpace other commercial property types by 75% or more this year. Others predict it will outpace other products but by a lesser percentage. No respondents expect industrial to lag other sectors.
According to Cary Krier, senior vice president of Jones Lang's National Industrial Capital Markets Practice, the percent of advantage represents a general measure of fundamental performance rather than a specific metric. "The people being surveyed aren't capital markets oriented," he explains. "They're thinking in terms of occupancies, rent growth and things like that more than sale values. It's more a statement that industrial as a product type is seen as less risky than the others. It says rents are still going up and occupancy rates are still firm."
"Reading between the lines, this positive outlook is really the result of the stability the industrial market has experienced through the recent cycle with consistent demand and disciplined development," says Craig Meyer, managing director and national practice leader for Jones Lang's Industrial Services Group. "There are very few markets that are overbuilt and the overall vacancy rate across the nation is still just 8.5% and even lower for newer institutional grade logistics product."
Perhaps as a reflection of their optimism about the industrial property type, the survey finds that half the respondents expect to increase their activity this year compared to '07, while the other half plan to reduce it. Krier says the second group consists primarily of multinational companies that can develop or invest anywhere in the world, while the first encompasses companies without that capacity.
"The big guys are pulling out of the country because they can get better yields overseas," he tells GlobeSt.com. "The industrial market here is very efficient, so the yields aren't very exciting. You go overseas and you can make much bigger returns. It doesn't mean you can't make money in the US, only that you can't make as much as you can elsewhere."
When asked if they were witnessing any signs of recession, the majority of respondents report seeing few or no signs. Krier affirms the impression coincides with what he hears directly from clients. "People who are talking to tenants and actually building buildings tell me the market is strong," he says. "There are people who pulled projects off the table, certainly, but we're talking to lots of people who want to break ground on projects. If lenders and tenants were worried, that wouldn't be happening."
Krier acknowledges that tenants have slowed down their decision making, but he says they have not halted it. "There's going to be positive absorption this year," he asserts. "In the Northeast and Southwest, you're going to have really positive absorption. It may not match last year's level, but it will be solid. If we were in a recession, the figure would be negative."
When asked to list which US development or investment markets they like, 57% of respondents named the Southwest, 50% the Northeast, 29% the Northwest, 29% the Southeast and 21% the Midwest. Among other survey findings, a vast majority of respondents (82%) report their industrial portfolio had an occupancy rate of 75% or greater.
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
