The U.S. industrial market is set to shine in the near future and will prove a popular destination for investors’ dollars.
This according to guests on the most recent episode of the “Commercial Real Estate Show,” who discussed sector fundamentals, investment sales activity, tenant attitudes and spec development.
Nationally, the industrial real estate market has experienced seven consecutive quarters of positive net absorption, according to Mike Felton, vice president, corporate industrial services, for Bull Realty. In 2011, the national vacancy rate declined from 10 percent to 9.5 percent.
Mitch Roschelle, a partner with PricewaterhouseCoopers, said 2012 will be “a transition point” from the recent recession to a period of rent growth and new development. 2013 and 2014 will feature “a mini-explosion in the expansion of the sector,” he said. Investment sales in the sector also will pick up steam in the year ahead, Roschelle predicted.
“It’s a neat little niche in the commercial real estate sector that often gets overlooked because it’s not as sexy as some of the other property types but it’s got a great yield, and I think that’s going to be the catalyst for a big pickup in transaction volume, starting in 2012 and continuing thereafter,” he added.
“I agree: I think it’s going to be a favored asset class moving forward,” replied show host Michael Bull, the founder of Bull Realty.
Tenants are finally exhibiting some increased confidence, “being somewhat optimistic but being careful is the best way to put it,” said Ralph Kittrell, a principal with Exceter Property Group.
“I would echo that … For every deal that’s got a right of first offer on a space that’s adjacent to them, it’s also got a termination option on what they’ve actually got under lease, so they’re looking to get out on both sides,” said Doug Smith, senior vice president for Seefried Properties.
Kittrell also said his company is starting to see some demand for smaller deals.
“I think that’s good because the smaller companies are starting to see some growth and coming back into the market,” he said.
Approximately 40 percent of the 32 million square feet of industrial space under construction is spec development, Smith noted. In the near future, such development “is going to be spotty, and it’s going to be in specific markets where there’s some real drivers to convince folks to go spec, whether it’s in Florida or [Southern California’s] Inland Empire, Houston, and around some of the airports.” (credit commercial real estate show)