One Exec Thinks the Industrial Bid-Ask Spread Is Narrowing

A disparity between sellers’ bids and buyers’ asks will continue to be a headwind for the sector, though the gap “seems to be narrowing,” according to one industry watcher.

 “There’s still some distance between the two sides,” says Steve Wolff, vice president, acquisitions at Spirit Realty in Dallas, in advance of the GlobeSt Industrial conference this week. “Investors who are acquiring all-cash know that the field of buyers is smaller than at the start of 2022. This equates to fewer bids at increased cap rates – in some cases 150+ basis points, causing sellers to pause and reconsider selling (for the time being).” 

However, Wolff says the sector remains compelling for investors. The strongest fundamental growth drivers for the sector will be driven by  the increased need for distribution along with the push for manufacturing in the US, he notes, adding that increased demand and limited supply portend strong rent growth and low vacancy in the future.

“We believe that the industrial asset class has strong fundamentals through economic cycles and as a long-term investor, we understand and we’re comfortable with the natural ebb and flow of the market that occurs over time,” Wolff says. “Our goal is to strategically increase our footprint in the industrial sector investing across distribution, light manufacturing, IOS and cold storage assets.”

Heading into 2023, Wolff says he’ll be watching interest rates and high-yield bond spreads closely.

“Both will play a large role in how cap rates are estimated, along with the pool of potential buyers of industrial assets,” he says. “On the operational side, we will pay close attention to rental rates, vacancy, cost of construction, build-to-suit activity, and changes in tenant growth and demands.”

Check back soon for more updates from Wolff and other panelists and this week’s GlobeSt Industrial conference in Scottsdale, Ariz.