Industrial Maintains the Momentum

Smart institutions and equity recognize the need to add more industrial, says Foster.

ROSEMONT, IL—Reports this week from both Ten-X and Cornerstone Real Estate Advisers have given high marks to the industrial sector. Ten-X’s report notes that while pricing growth has slowed down recently in all property sectors aside from multifamily, industrial has posted the biggest year-over-year gains at 17.1%. Cornerstone’s quarterly overview of the commercial real estate notes that industrial fundamentals continued to tighten in the fourth quarter of 2015, and expects single-digit vacancies and accelerated rent growth over the next two years. Against this backdrop, Avison Young this past week announced that it had brokered the sale of a five-building, one-million-square-foot portfolio in Texas, Oklahoma and Kentucky to Industrial Property Trust. All five properties are fully leased to Victory Packaging. Erik Foster, principal with AY’s industrial capital markets group in Rosemont, IL, says the sale that he and his team arranged is in keeping with what they’ve seen recently. GlobeSt.com caught up with Foster this week to get his take on the state of the market. GlobeSt.com: How did this deal fit in with the types of transactions you’ve been seeing? Erik Foster: These were key logistical markets with a solid company on the lease. Those tend to be what’s in favor among industrial investors across the country. GlobeSt.com: Is the market tilted more toward these key markets than in 2015? Foster: The momentum that industrial has gained over the years will continue in 2016. As more and more capital looks to buy well-underwritten buildings such as these, the market will continue to move forward for sellers of quality assets. GlobeSt.com: What kinds of trends have you seen recently? Foster: I think we’ll see increased foreign capital into our space. I also believe that some buyers will be attracted to lesser-quality assets in order to gain a higher return. That will be a trend we’ll continue to see play out this year. GlobeSt.com: Over the past year, we have seen some very large acquisitions by foreign buyers, in particular the Global Logistics Properties portfolio acquisitions in the US. What has attracted these buyers to industrial as they move outside of core office and multifamily? Foster: The more sophisticated institutions and foreign equity sources have come to the realization that industrial needs to be a large portion of their real estate portfolios. Over the past couple of years, you’ve seen the positive trends in the fundamentals of industrial real estate, everything from logistics to e-commerce, that have helped to grow the sector. Smart institutions and equity sources are recognizing that.