Industrial Sales May Shatter Pre-COVID Records This Year

Sales of industrial assets this year are poised to shatter the $120 billion record set in 2019, according to new research from LightBox and SIOR. 

Investors surveyed were bullish on the sector, especially in markets near growing population centers. Nearly 72% of those surveyed expect investment levels to increase, with nearly half predicting a “notable” increase, sentiments that are no doubt buoyed by the expectation that e-commerce consumer behaviors from the COVID-19 era will become what LightBox dubs “ingrained patterns.”  E-commerce sales grew by 40% over the past year and are predicted to reach $1.1 billion by 2025.

“As e-commerce continues to transform our economy, investors are looking for every opportunity to gain entry or expand their positions in the industrial sector.,” said Tina Lichens, Senior Vice President, Broker Operations, LightBox. “Industrial is attracting significant amounts of domestic and foreign capital and is well-positioned to withstand supply chain disruption or other volatility that might occur.”

The firm predicts that an uptick in occupier demand, driven mostly by retailers and logistics providers, will push rents between 5 and 7% higher, while asset prices could increase by even more.

This is great news for landlords and investors, of course, but creates a more challenging dynamic for tenants in the market.

“If you are looking to lease or purchase industrial real estate in any major market, welcome to the extensive waiting list of other businesses all seeking similar solutions for their space needs,” said Robert G. Thornburgh, CEO of SIOR, told LightBox. “Supply and demand imbalances are the most significant we have ever seen for industrial space.”

Large portfolios, particularly those tied to logistics, are clear winners. Of note: Blackstone’s recent acquisition of WPT Industrial REIT in a $3.1 billion deal consisting of 110 properties in 19 states. The deal gives Blackstone 37.5 million square feet of industrial space coast to coast.

Meanwhile, rising costs and labor and materials shortages are “key headwinds” for the sector.

“Over the past year, the industry has been experiencing an unprecedented increase in the price of steel, lumber, plywood and other key construction materials,” the report notes. “Pricing levels along with ongoing issues with a labor shortage and supply chain disruption are keeping the threat of additional volatility on the table.”

And when it comes to growth, nearly two-thirds of respondents to LightBox’s survey say to keep an eye on secondary markets like Columbus, Indianapolis, Jacksonville, Kansas City, Memphis and St. Louis.