2016 was truly a record-breaking year for US's industrial real estate sector. The previous year saw this sector's demand outpace its supply, and this trend is not slowing down in 2017. Because of this bullish trend, the sector's vacancy rate has driven down to 5.8 percent-this was the figure, which was released by JLL Industrial Investment Outlook, in the third quarter of 2016.
Because of this trend, the landlords are preferred as the rates of rents rose up to 8.2 percent when compared with those in 2015. Seeing this trend, the investors-are grabbing the opportunities to buy real estate in this expanding market and leveraging the private sector financing via commercial mortgage lenders.
In the industrial real estate sector, the year-over-year investment is down by 28.9 percent from the third quarter of 2015, but the total investment volumes look to be on track because they're all set to create the second-largest tally since the Great Recession.
Due to this, 2017 has a few uncertainties as far as the industrial real estate is concerned. However, the overall outlook of this sector continues to appear optimistic. The mix of uncertainties and optimism defying today's real estate sector has motivated us to give you five top factors that'll drive the industrial real estate's demand this year.
Trends that¡¯ll shape 2017's industrial real estate
The buzz about the rising infrastructure spending in the US is growing. And the growth of the spending has seriously become faster after Trump has expressed its interest in strengthening and improving infrastructures, such as roads and bridges. And it is a no-brainer that a growing infrastructure spending will surely create a rippled effect on the mighty industrial real estate.
Evolving urban logistics and e-commerce
E-retailers are working pretty hard to ensure that their supply chains are streamlined so that goods are always delivered to end-consumers quickly and cost-effectively. These e-commerce players are continuously finding innovative distribution centers that can feed a consumer's e-commerce appetite today. In the second part of 2016, the e-commerce growth was one of the key factors that pushed down the American industrial market's vacancy to less than 6 percent. And this vacancy is continued to decline even more in 2017. A good case in point: Distribution and Marking Services Inc. leased nearly 350,000 square feet of Wonderland Industrial Park's space in California. The site's strategic location to speed up the move-in was very critical. So in the future, more of such shifts may happen, which will certainly improve industrial real estate's growth prospects.
Ports may reap a number of benefits from the updates in infrastructure and e-commerce
Swift growth in e-commerce is expected to contribute to reviving America's port systems. As the demand for warehouses and mixed infrastructure strengnthens, US ports may reap benefits too. The coastal ports in New York and Los Angeles are the favorites for many leading players in today's industrial sectors. And with repurposing obsoleste terminals and increasing infrastructure spending, this year could be the one when the Mississippi waterway reclaims its glory within the global supply chain. Because of such factors, the demand for industrial real estate in this sector is expected to grow.
The institutional investor's interest goes sky-high
When it comes to making sizeable investments, industrial real estate gives its lenders super-lucrative opportunities. So if you're a lender looking to improve your commercial capital, then speculate in the industrial realty sector. In fact, as per educated guesses from leading real-estate pundits, the sale volumes of year-end industrial investment can cross the $ 45-billion mark. Every time, the high-volume investment activity is indicative of the asset class's capacity to weather financial, political, and economic uncertainties.
Creative industrial realty development is rising
The unpresented demand for industrial real estate and the push to improve delivery services may easily influence development across the US. This development may further persuade a lot of companies to find a space in secondary or even tertiary markets. Because of this, small-sized urban-core warehouses, reconverted assets, fulfillment centers, and multistory warehouses can easily become solutions for several businesses this year.
As there are many changes taking place in regulations and policies related to trade, transportation and storage sectors may easily get affected. Neverheless, the fundamentals remain, like always, strong. The construction and infrastructure are doubtlessly looking promising owing to the growth of e-commerce. Because of all these driving factors, we're pretty optimistic about the prospects of industrial realty sector flourishing in the coming time.