Sale-Leasebacks Account for Growing Share of Industrial Sales

Sale-leaseback transactions accounted for 7% of the total industrial sales closed last year and 9% of property trades made since the beginning of 2021, according to a new report from CommercialEdge.

Sale-leasebacks accounted for $4.8 billion in transaction volume over the past 17 months, and since the beginning of 2020, the price of a sale leaseback averaged $116 per square foot. That’s much higher than the overall average of $93 per square foot of industrial space sold during that same period, underscoring the demand for industrial assets among investors. 

About $18.1 billion in transactions have closed across US industrial markets as of May 31. The average sale price per square foot for industrial space also clocked in at $103 per square foot last month, a figure that’s 16.3% higher than in May 2020 – and experts from CommercialEdge predict that sales activity in 2021 could match — or even exceed — the record $44.4 billion in transactions closed during 2020.

Three cities that stood out for individual sale totals in excess of $1 billion closed since the start of the year: Los Angeles ($1.3 billion), Inland Empire ($1.1. billion) and Chicago ($1.1. billion), followed by Atlanta at $959 million and New Jersey with $949 million.

Nearly 99 million square feet of new industrial space supply was brought to market since the beginning of 2021, and nearly 456 million more square feet of industrial property was in the planning stages as of May 2021. Commercialedge supply forecasts estimate an annual yield of between 250 and 350 million square feet through 2026. 

“What remains to be seen is whether issues related to availability and cost of materials and developable land will lead to significant delays in the pipeline, or if the growing pressure of e-commerce expansion will be strong enough to push the delivery forecast through,” CommercialEdge’s Ioana Ginsac says.