The Growing Need To Modernize Aging Industrial Assets
More than 70% of US industrial space was built before the 21st century.
The need for modernization of industrial assets will continue to climb this year and beyond as digitalization, demographics and deglobalization drive the booming sector to new heights, a team of Newmark researchers say.
They note that more than 70% of US industrial space was built before the 21 century, while a full third of the inventory is over 50 years old. And “the current construction pipeline measures 500 million sq. ft., nearly all set to deliver by 2023, signaling a potential future supply gap if speculative construction starts remain muted in 2022 due to prolonged disruption,” they predict. That’s especially true as net absorption nearly totaled that same amount in 2021 alone.
Pathways to achieving that modernization could involve prioritizing last-mile inventory additions in high-population growth areas. The Newmark analysts note that in a recent study, 99% of 500+ retailers surveyed shared that they will offer same-day delivery by 2025 (35% offer it today).
Firms are also likely to take greater control of their supply chain In 2021 alone, business logistics expenditures increased to an average 11% share of total sales revenue, and 65% of midsize companies surveyed are changing business plans to include strategic stockpiling, Newmark says.
It’s also likely that developers will look toward creative solutions in land-constrained markets, including remediation and revitalization of contaminated land sites.
Looking forward, Newmark predicts “technology and automation adoption will accelerate to solve for challenging labor conditions, improve efficiency, and to meet corporate ESG goals,” adding that the warehouse automation market is expected to grow by 1.5 times by 2025 to $37.6 billion. Fleet electrification will likely take center stage in the months and years to come, especially for last-mile delivery.
In addition, the future industrial market may expand to a ‘Low-Earth Orbit’ economy: “asteroids circling the earth are composed of quintillions of dollars’ worth of minerals, including those in scarce terrestrial supply and key to critical chip production,” the report notes. Space sector firms have been venture capital darlings this year, with a record $17.1 billion in VC investment in 2021.