Friday, September 12, 2014
Mid-Year Industrial Momentum Will Continue
by Erik Foster (Chicago)
Investors have been on a buying spree in the industrial sector nationally for a number of reasons. Many are drawn by the potential for income stability and by the long-term growth trends given the positive macroeconomic outlook for distribution facilities, as well as tempered spec development keeping rental growth on it's positive pace. According to Avison Young’s review of data from the past two years, investment in industrial assets across the United States rose 55 percent since mid-year 2012, from $15 billion to $23 billion.
The West region continued to see the majority of activity, moving from $5.2 billion in investments at mid-year 2012 to approximately $6.6 million in 2014, according to research from Real Capital Analytics.
The gains from 2013 were particularly strong in secondary markets such as San Diego (260% increase), Orlando (202% increase), Indianapolis (138% increase), Memphis (125% increase) Atlanta (96% increase) and Charlotte (90% increase). Investors are moving into these and other secondary markets as activity, and pricing, is peaking in core markets.
The mid-year statistics also showed that the Midwest was a steady performer. It was the only region to experience gains in each period, moving from 15.1 percent of activity in 2012 to 16.4 percent in 2013 to 16.5 percent in 2014. This is not surprising, as recoveries always come later to the Central U.S.
The Southeast region was the most volatile during that time period, moving from the second most active region in 2012 to fifth in 2013 and back to second again in 2014. Markets with the greatest declines in sales activity from mid-year 2013 to mid-year 2014 were Miami, 71 percent; Eastern Pennsylvania, 56 percent; and Baltimore, 50 percent.
For the remainder of the year, look for continued strong demand from investors for all classes of industrial assets, core, core-plus and value add. Also, look for new players to be arriving on the acquisition scene, it is not the same old cast of characters; the global marketplace is taking a very strong interest in industrial assets.