An extreme premium on cap rates for new assets has led to a surge in industrial supply, according to a new analysis from Real Capital Analytics.
As consumers shifted buying habits and moved to online shopping amidst the pandemic, the need for industrial space increased exponentially, driving up investor interest in the sector. Now industrial property prices are at a record high—leading some investors to say it's tough to find deals. And, as RCA's Jim Costello notes, "if you cannot buy it, you build it."
"The growing difficulty of sourcing deals in the industrial market can make development look like an attractive option," Costello writes. "There are other reasons one might deliver new space, however. One notable issue is that while cap rates are at record lows, the premium on cap rates for the newest assets is at an extreme as well."
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