Why the Industrial Sector is Net Lease's Darling

NEW YORK—Assets in the net lease space can range from last mile distribution centers to convenience stores to micro hospitals to offices. But the standout category is the industrial segment.

“If you are trying to be an investor and get a stronger return, industrial is the way to go,” says Camille Renshaw, co-founder and CEO of B+E, an investment brokerage firm specializing in net lease real estate and 1031 exchanges. “The industrial segment is currently the most popular asset class in net lease,” she tells GlobeSt.com.

E-commerce is clearly the leading driver for industrial assets as companies attempt to get their products to their customers quickly and efficiently.

“We are also seeing creative ways in which companies are using industrial facilities and owners are meeting their needs. For example, one company is investing in marijuana and are housing their products in industrial warehouses. It’s a win-win situation for landlord and tenant,” says Renshaw.

Even though industrial cap rates have begun to rise to a full 12 basis points in the first quarter of 2019 to an average of 6.39%, current economic conditions are incredibly favorable for investors, Renshaw says.

As consumers put increased pressure on retailers to deliver goods faster and more efficiently, the industrial sector will play a very important role and that means sustained, if not increasing, demand for warehouses, distribution facilities, and manufacturing buildings.

Already-strong industrial markets such as Dallas, Los Angeles, Atlanta, and Chicago continue to be major logistics hubs. However, assets located in other markets such as Indianapolis, Memphis, and Cincinnati will continue to provide opportunities for investors to purchase newly constructed industrial properties with both growing and established companies as those firms expand.