Industrial commercial real estate, which many don’t consider the most flashy piece of product type out there, is on a tear, despite how boring it might seem to some.
Industrial rents are on the rise, while vacancy is falling, according to all of the major brokerage firms’ recent first-quarter reports on the sector.
Cushman & Wakefield’s view of the industrial market during the first quarter is especially attractive. Year-over-year vacancy rates during were at 6.1 percent, down from 6.8 percent. Industrial employment also rose to 25.1 million people from 24.9 million, according to the firm. All of these numbers are expected to continue in a positive manner for this commercial real estate sector.
What’s driving this?
Factory activity is increasing in the United States, and there is more demand for warehouse space, due to an increase in online-retailer growth, both by Internet-only merchants, such as Amazon.com, but as well as brick-and-mortar chains, like Walmart, that have successful Web sales.
That drives more speculative construction, says Cushman. In this year’s first quarter, there was a whopping 110 million square feet underway in the industrial commercial real estate sector.
The Urban Land Institute also forecasts industrial rent growth in the near future. The organization projects it will increase 4.5 percent this year, according to National Real Estate Investor, and will jump three percent next year, and nearly that in 2018.
When there is news of a bubble in commercial real estate, it is easy to get nervous. But increased job growth, and a stable economy in the United States compared to other countries, are sure signs that we can only expect good things from industrial commercial real estate in years to come.
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