5 Reasons Why Industrial Real Estate Outlook Is So Damn Good
With all the volatility in the commercial real estate industry, it’s essential to keep your eyes peeled for opportunities. If you’re a risk-tolerant investor looking to invest in property, industrial is one of the best asset classes for 2023.
E-commerce has been booming for the past couple of years, and more and more online retailers need space to store their inventory. This demand for industrial warehouses and distribution spaces will only continue increasing in the coming years.
E-Commerce Is Booming
E-Commerce has changed the way people buy goods and services. Consumers can now connect with businesses through their smart devices and purchase from anywhere.
As a result, e-commerce is booming globally. It has a substantial impact on the supply chain and shipping industry.
It’s so powerful that a small business in Columbus, Ohio, saw the amount paid via transactions on Stripe increase by 40 times over the past five years.
These trends aren’t going away anytime soon. As a result, supply chains face a growing need for warehousing and manufacturing space.
There’s A Lack Of Supply
Industrial buildings are the core of the logistics infrastructure that supports manufacturing, assembly, warehousing, research, storage, and distribution. While not common in most consumers’ daily lives, industrial real estate is an integral part of the modern economy.
The rise of online retail has made industrial space an increasingly popular investment. This is because e-commerce companies need space to warehouse inventory and coordinate shipping routes.
This has created a glut of available industrial properties. As a result, landlords need help finding replacement tenants.
Tenant Turnover Is Low
Industrial properties are typically not seen as glamorous or flashy investments, but investors have better options. There are a few reasons why industrial real estate is becoming a popular investment product for 2023.
The first reason is that tenant turnover is low for this asset class. This is because tenants are likely to grow within an industrial opportunity rather than outgrow it and move on to another asset type.
Keeping tenant turnover to a minimum is vital for commercial real estate investors to keep a stable ROI. However, it is essential to remember that several expenses are associated with turning over properties. This includes administrative costs, maintenance costs, and marketing and advertising expenses.
There’s A Lack Of Land
Industrial real estate is typically a land-intensive asset class, so it’s no surprise that the supply of land available to build new warehouses and distribution centers is limited. For starters, it’s hard to find greenfield sites in major population centers that are large enough to accommodate tenants and their goods.
In addition, the cost of building materials is skyrocketing. This increases the price of new buildings, making them less attractive to potential tenants.
Despite this, the industrial real estate market is expected to continue to be one of the hottest commercial property sectors in 2023. Vacancy rates will be low, and rent growth will continue to increase by double digits. Moreover, the sector is likely to be among the strongest performers in the commercial real estate world this year, according to research from ULI and PwC.
There’s A Lack Of Competition
Increasing industry concentration concerns some economists, but it’s difficult to know whether this is bad for competition or consumers. Economists look at several factors to determine this, including profits, investment, business dynamism, and prices.
Industrial real estate is an excellent asset class to invest in during low competition. Unlike retail space, which is struggling with the rise of online shopping, industrial space will always remain in high demand.
According to a new report by Plante Moran Cresa, national vacancy rates are at record lows, resulting in rent growth that is expected to double last year’s. This is good news for investors who own industrial properties, and it’s also great for tenants looking for warehouse spaces shortly.
