|Factors Driving the Industrial Market’s ResurgenceGlobal supply chain trends and the demand for big box distribution space by the e-commerce sector are some of the elementsbehind recovery of the United States industrial market recovery, according to Jones Lang LaSalle.According to Jones Lang LaSalle, the top five themes driving the industrial real estate resurgence are:
- Strong supply and demand characteristicsDemand has maintained a stable trajectory, marked by eight consecutive quarters of positive net absorption, but at 25.3 million square feet (sf) in the first quarter, it remains well below pre-recession levels. However, a spike in demand for big-box distribution and logistics space (>400,000 sf), has re-introduced speculative development in key hub markets where vacancy has decreased significantly. While in the meantime, a renewed confidence from corporations has triggered a meaningful flow of build-to-suit activity.
- Foreign capital seizing the momentThe U.S. industrial investment market is ripe for growth. Since the recession in 2009, when annual industrial sales volume plummeted to just $10.9 billion, the pace of industrial investment sales increased to $35.1 billion in 2011. Overall sales volume for 2012 will likely be in the $40 to $45 billion range.
- Global supply chain trendsGrowing labor costs in Asia, particularly China, coupled with volatile fuel costs, have forced companies to re-evaluate their supply chain networks.
- The explosion of e-commerce in the U.S. and globallyThe primary industries leading the demand for warehouse and distribution space are food-and-beverage, e-commerce and traditional retailers. In fact, one-third of all demand for big-box space is tied to multi-channel retailers or ‘e-tailers’.
- Solid U.S. connectivity and infrastructureThe U.S. has a world-class supply chain infrastructure (e.g. ports, highways, airports, rail) which is another important factor in attracting and retaining manufacturers. Its proximity to the Panama Canal which is currently undergoing an expansion so that large ships can pass through its waters is another plus for the U.S. (CREDIT NAIOP)