{"id":1004428249,"date":"2020-04-30T22:25:37","date_gmt":"2020-05-01T06:25:37","guid":{"rendered":"https:\/\/www.commercialsearch.com\/news\/?p=1004428249"},"modified":"2020-05-04T07:11:36","modified_gmt":"2020-05-04T15:11:36","slug":"industrial-real-estates-positive-prognosis","status":"publish","type":"post","link":"https:\/\/www.commercialsearch.com\/news\/industrial-real-estates-positive-prognosis\/","title":{"rendered":"Industrial Real Estate’s Positive Prognosis"},"content":{"rendered":"

The COVID-19\u202fpandemic\u202fis disrupting the supply chain and forcing many consumers to change the way they shop.\u202fBut while these disruptions are creating economic strain, they also present huge opportunities for industrial real estate.\u202f <\/p>\n

\u201cThe industrial market is one of the obvious winners in the current situation,\u201d<\/em> said Bert Sanders, vice chairman at Newmark Knight Frank. <\/p>\n

\"\"It\u2019s easy to see why. Social distancing has changed the nature of how people\u202fbuy\u202fgoods\u202fbecause, in\u202fthe absence of\u202fconventional\u202fretail,\u202fconsumers are making\u202fthe\u202fmost of their purchases online. The\u202f\u201cjust in time inventory <\/em>\u201csupply-chain strategy is suffering under the strain of this expansion of e-commerce. As a\u202fresult,\u202fthe need for warehousing of additional inventory has grown.\u202fAdditionally,\u202fretail locations that are temporarily closed will need additional storage for their excess inventory, creating\u202fshort-term demand for temporary space.\u202f <\/p>\n

CBRE reported 34 million square feet of positive net absorption nationwide in the first quarter, and average vacancy at 4.5 percent\u2014nearly a record low. Asking rents rose by 4.8 percent year-over-year. Other property types did not finish the first quarter as solidly.<\/p>\n

\n

READ MORE:<\/strong> Grocery Stores Pick Up, While Most Retail Slows Down<\/a><\/p>\n

\n

The resilience of the sector is also seen in investor returns. According to Nareit, every major real estate\u202fsector yielded negative year-to-date returns.\u202fMultifamily posted\u202fa\u202f26\u202fpercent loss,\u202foffice\u202fa 28\u202fpercent loss\u202fand\u202fretail a whopping 48\u202fpercent loss. Meanwhile industrial was only down\u202f10\u202fpercent\u202fover the same period.<\/p>\n

Not all markets benefit<\/strong>\u202f <\/h2>\n

\u201cThe obvious benefactors are the tier-one cities,\u201d<\/em> Sanders noted.<\/p>\n

The largest markets and point-of-entry markets can be expected to see\u202fincreased\u202fdemand for warehouse\u202fand\u202fdistribution space.\u202fLos Angeles, for example,\u202fhosts over a billion square feet of industrial inventory while having vacancy rates less than half of the national average.\u202fThe available space is being absorbed as fast as it\u2019s getting built, yet they\u202fstill have a lot of room to run.\u202f\u202f <\/p>\n

\"\"Tertiary markets, on the other hand, will profit less from the increased demand. Cincinnati, for example, has seen industrial vacancy\u202fnearly\u202fdouble in the past year with preexisting construction threatening to overburden an already saturated market.<\/p>\n

Cincinnati is not alone, as many inland markets have been overbuilt in the past few years in a flurry of investments in last mile logistics. Meanwhile,\u202fnearby Indianapolis is projected to be one of the highest markets for absorption as it establishes itself as the premiere distribution hub for <\/span><\/span>the lower Midwest. The pandemic has moved the bottleneck in the supply chain from last mile to primary and intermediary transportation hubs.<\/span><\/span>\u202f<\/span><\/span> <\/span><\/p>\n

Investors are taking a \u201cwait and see\u201d<\/em> approach to new deals until the dust settles, while many deals that were already in the works are continuing to go forward as scheduled. Sanders says that \u201cthere is a lot of dry powder on the sidelines looking for opportunities.\u201d <\/em><\/p>\n

Consumers still buying<\/strong><\/h2>\n

While it is clear an economic downturn is upon us,\u202fconsumer demand for essential goods\u202fhas not abated<\/u>\u202fand,\u202fin some cases,\u202fit has increased.\u202fThe most obvious example is food.\u202fHome delivery of groceries has become dramatically more popular and overall grocery sales have increased as well. This is entirely due to social isolation practices preventing people from eating out and social distancing concerns keeping people from visiting grocery stores\u202funless\u202fabsolutely necessary.  <\/p>\n

\"\"

Andrew Kern, Senior Research Analyst, Yardi Matrix.<\/p><\/div>\n

A recent CBRE report on the COVID-19 food industry implications<\/a> on industrial real estate cited data showing online grocery sales grew 100 percent between March 13 and March 15 and that 46 percent of respondents intend to continue buying groceries online after the pandemic subsides.<\/p>\n

This underscore\u2019s CBRE estimate that an additional 75 million to 100 million square feet of cold storage is needed. It is possible to retrofit existing inventory for cold storage,\u202fbut purpose-built climate-controlled facilities are more desirable and tenants are willing to pay a premium to occupy them.\u202f <\/p>\n

Durable goods go online<\/strong>\u202f <\/h2>\n

On\u202fthe\u202fdurable goods\u202fside,\u202fincreasing demands\u202fon e-commerce will require additional warehouse-distribution facilities\u2014bf particularly\u202fin the port-of-entry markets. Consumers who are unable to patronize retail locations will need to order online,\u202fputting greater strain on the supply chain.\u202fSince\u202fthese\u202fgoods\u202fmust\u202fbe kept in larger quantities to supply that\u202fdemand,\u202fthe existing bulk facilities will need to be expanded to accommodate the change.\u202fAdditionally,\u202fthe need for temporary inventory storage for brick-and-mortar retail will also fuel demand for the immediate future.<\/p>\n

There is a great deal of economic hardship ahead, but industrial real estate will not only weather the storm but grow in new and interesting ways.\u202f <\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

Increased online shopping should continue after the pandemic and that’s good news for warehouse and distribution real estate in the long term. <\/p>\n","protected":false},"author":892,"featured_media":1004430157,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[21784,21748,21783,45527,23891,21742],"tags":[],"class_list":["post-1004428249","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-brokerage","category-industrial","category-investment","category-keyword-optimized","category-national","category-latest"],"acf":[],"yoast_head":"\nIndustrial Real Estate's Positive Prognosis - Commercial Property Executive<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.commercialsearch.com\/news\/industrial-real-estates-positive-prognosis\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Industrial Real Estate's Positive Prognosis\" \/>\n<meta property=\"og:description\" content=\"Increased online shopping should continue after the pandemic and that's good news for warehouse and distribution real estate in the long term.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.commercialsearch.com\/news\/industrial-real-estates-positive-prognosis\/\" \/>\n<meta property=\"og:site_name\" content=\"Commercial Property Executive\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/CPExecutive\" \/>\n<meta property=\"article:published_time\" content=\"2020-05-01T06:25:37+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2020-05-04T15:11:36+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2020\/04\/Distribution-1.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"762\" \/>\n\t<meta property=\"og:image:height\" content=\"603\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Andrew Kern\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@cpexecutive\" \/>\n<meta name=\"twitter:site\" content=\"@cpexecutive\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.commercialsearch.com\/news\/industrial-real-estates-positive-prognosis\/\",\"url\":\"https:\/\/www.commercialsearch.com\/news\/industrial-real-estates-positive-prognosis\/\",\"name\":\"Industrial Real Estate's Positive Prognosis - 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