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.
