Will Industrial Activity Continue to Grow in 2020?
Industrial activity hit new records in 2019. Can we expect more of the same from the market next year?
“Our team is optimistic about this region given the current strong market fundamentals, which include historically low vacancy rates, high employment rates and strong population growth,” Pharris, co-founder and president at CapRock Partners, tells GlobeSt.com. “The explosive growth of ecommerce and the robust activity at the ports of Los Angeles and Long Beach support the increasing demand for both large-scale logistics buildings and last-mile fulfillment centers.”
Despite some of the looming concerns stemming from trade tensions, Pharris says that the strong fundamentals offset those challenges. “While current headlines over trade wars and the upcoming 2020 election may raise caution flags, the overall investment environment appears stable,” he adds. “The debt markets are maintaining conservative underwriting standards and a significant amount of capital is looking to acquire stabilized investments. We see a relative balance of supply and demand in our target markets of California, Nevada and Arizona, and we are considering new opportunities for value-add and ground-up developments in the West.”
In 2020, CapRock plans to continue its core strategy, which is focused on building institutional-quality assets and fulfilling the strong demand for industrial product—which has produced a severe supply shortage in many California markets. “With a watchful eye on the political and economic climate, we continue to conduct rigorous sensitivity analyses and stress test our downside scenarios,” explains Pharris. “Our focus is prudent investment choices and ensuring we never put investment capital at risk. Even though debt is readily available we are intentionally choosing low levels of leverage in the event of an unexpected downturn. If the market slows, we want to ensure that we have a conservative capital stack.”
In fact, CapRock plans to remain an active buyer and developer in its target markets next year. “CapRock is in the midst of pursuing a strategic growth initiative throughout the Western U.S., actively acquiring land for development and value-add industrial buildings in California, Nevada and Phoenix, and we will continue to be active buyers in 2020,” says Pharris. “With its various partners, CapRock is currently under construction on more than 4 million square feet in California and Nevada and will be under construction on an additional 4 million square feet in 2020.”