Key Highlights
- Rising e-commerce demand to drive already resilient industrial real estate sector to unprecedented growth
- Warehouse space is 1.5B square feet short of demand, according to MarketWatch
- Adaptive reuse of retail buildings for industrial occupiers expected to accelerate
Already Hot Industrial Real Estate Sector to Get Even Hotter
One of the most resilient real estate sectors during the COVID pandemic has been the industrial or warehouse sector. Why? Consumers are ordering online what they can’t get in-person due to pandemic lockdowns. That jump in online orders compels online providers to have more warehouse space in more places to distribute those orders faster.
According to CBRE Research, e-commerce growth surged +44.5% in Q2 2020 from 14.8% in Q1 2020 alone.
Industrial Demand Driven by E-Commerce
Again according to CBRE, “$1B in incremental e-commerce sales generates 1.25M square feet of warehouse space demand. Therefore, net absorption is projected to reach nearly 250M square feet in 2021, more than the previous five-year annual average of 211M square feet.”
More Retail-to-Industrial Conversions in 2021
With online shopping is only expected to increase (is that possible?), demand for retail-to-industrial conversions will only increase. Already, there is strong demand for infill warehouse space in urban cores but land constraints and costs are limiting that development. Overall, new industrial completions are projected to jump +29% in 2021.
Markets to Watch
The Inland Empire in the Southwest (Phoenix, Las Vegas, Denver, Salt Lake City and Reno) is projected to have robust industrial development due to their proximity to burgeoning populations. Texas is forecasting population growth at +9% over the next five years and that growth will most likely benefit Fort Worth, Houston and San Antonio industrial markets. El Paso is also very likely to benefit from its proximity with the Mexico border. CBRE Econometric Advisors are projecting that industrial asking rents in El Paso will rise +28.5% over the next five years.
In the Southeast, the primary demand driver for more industrial space is expected to be pro-business state governments offering low taxes, location incentives and training programs for distribution workers. The large number of consumers surrounding seaport markets of Charleston, Savannah and Virginia are expected to drive industrial demand as are the inland port markets of Greenville SC, Atlanta and Central Florida.
Agents…pay attention to industrial real estate for your investors and yourself.
Thanks to cbre.
