The Evolution of Real Estate: Understanding the Growth in Industrial Properties

The Growing Demand for Industrial Properties

Industrial properties, once the less glamorous sub-sector of real estate, have seen growing interest from investors and diverse enterprises. The growth trajectory was triggered mainly by the Covid-19 crisis, as businesses needed to move their operations online. Companies have increasingly been relying on warehouses and distribution centers for their eCommerce strategy. There has been a notable spike in leasing of industrial property as firms expand their capability to fulfill orders generated online directly to customers.

Understanding the Dynamics of Industrial Properties

Owners and investors of these properties enjoy several advantages. Industrial properties typically offer longer leases, making them an excellent choice for investors seeking stable income. They also allow for a variety of uses, including warehouses, factories and distribution centers, making them more versatile in economic downturns. These properties are also easier and less expensive to maintain compared to office buildings or retail centers.

Key Drivers of This Growing Trend

Several factors have spurred this shift in real estate dynamics. One key driver has undoubtedly been the evolution of consumer behavior, particularly the rise in eCommerce. The pandemic has only accelerated this trend, creating a corresponding demand for the logistics and shipping infrastructure that industrial properties provide. Secondly, there is the rise of the gig economy. As more people start their businesses, they require small light industrial spaces for operations, stocking and shipping of products.

Institutional Involvement in Industrial Properties

With the disruption of the traditional office space market, institutional investors have been increasingly diverting their resources towards industrial properties. A February 2021 survey by Institutional Real Estate, Inc. revealed that 96% of institutional investors planned future investments in industrial real estate, making it the most favored asset class. Private equity firms, insurance companies and even pension funds have begun to see the value prospects in this long-overlooked area.

The Future Outlook for Industrial Properties

Given the prevailing trends and circumstances, experts predict a continued rise in demand for industrial space in the coming years. E-commerce, which is expected to keep growing, still accounts for under 20% of the total retail sales in the U.S., indicating a colossal room for future growth. Furthermore, companies have increased focus on resilience in supply chains post-pandemic, leading to more demand as they stock up to protect against future disruptions.

• Industrial property provides a low-risk investment due to its versatility and the stability of income flows.
• The key drivers of industrial property include eCommerce growth, proliferation of small businesses and a shift to online work.
• It is critical to understand the specific requirements of the industry you intend to lease to, in terms of location, size, power supply, clear height, dock doors, etc.

The Evolution of Real Estate: The Takeaway

The global pandemic has shown us that change is the only constant in life, and this applies substantially to real estate. Industrial properties have emerged from the shadows to be at the forefront and are becoming an essential part of the real estate industry. Looking forward, the trend signals growth and opportunities for investors and businesses alike. In this rapidly evolving landscape, knowing where to look could be the key to reaping substantial rewards.