Industrial Deals Set To Exceed Last Year’s Record Numbers
Pricing has risen a quarterly 13.3% to reach $113 per square foot.
Industrial assets traded at a nearly 31% premium over 2020 prices in the second quarter, clocking in at a national average of $113 per square foot. That’s an increase of 13.3% over Q1 figures—and underscores what experts have been crowing about since even before the COVID-19 pandemic: industrial is the hottest sector to watch in CRE right now.
A new report from CommercialEdge shows that an estimated $23.3 billion of sales have closed so far this year, putting 2021 on pace to surpass last year’s record $45.0 billion in deals. That increase will likely be driven by an increase in the average sales prices, not an increase in the total number of sales.
“The growth of sales prices has not solely been a response to the increase in demand for industrial assets, although the pandemic did accelerate the trend,” the report states. “Rather, the run-up began in the second half of the last decade. In the first quarter of 2016, the average price of an industrial building was $62 per foot. Prices increased nearly 40% by the first quarter of 2020 to $86 per foot.”
Average sale prices increased the most in New Jersey (from $134 per foot in 2020 to $202 this year, a 51% increase), Orange County ($224 to $322, 44%) and Denver ($119 to $164, 39%).
Industrial demand has skyrocketed over the course of the pandemic and shows little sign of relenting. E-commerce now represents more than 17% of all core retail sales, and data center demand has ballooned over the course of the pandemic thanks to the migration of work, socializing, and schooling to online platforms. And cold storage and last mile demand has ticked up as the economy continues to recover post-COVID.
“These factors have converged to propel investor interest in industrial assets to new heights,” the report notes.
And increasingly, institutional investors are flocking to the space, which CommercialEdge experts posit could be driving up prices as well. Greystar recently acquired the remaining 55% stake in Thackeray Partners, after taking a 45% stake last year, saying it looks to “capitalize on growth opportunities in the industrial space.” And other recent entrants include Velocis, Rockpoint Group, Alliance Residential Co. and Rising Realty Partners, according to CommercialEdge.