We all know the saying: new year, new me. It seems the industrial real estate market is also looking to make a few changes going into the new decade. The driving forces behind industrial real estate purchases have shifted more toward the consumer.
Investors used to focus on manufacturing, business cycles, and heavy infrastructure. Now, consumers, population, flexible configurations, and location lead the pack.
Industrial facilities are becoming more than storage and distribution spaces. Investors are looking to create multi-function facilities to attract and keep employees. This creates a demand for buildings that have or can support high-end breakrooms, restrooms, fitness centers, and environmental controls.
With high tech facilities come high tech equipment, which require highly skilled workers to operate them. The unemployment rate is at an all-time low of around 3.5%. This is great for our economy, but a bummer for industrial investors as the available workforce dwindles.
Location, location, location. If investors can’t find an industrial investment that supports next day delivery, can compete with e-commerce giants like Amazon and Walmart, and has good cold storage, they’re in trouble.
Consumer patience for delivery is probably at an all-time low, and people want their goods delivered lickety-split. Size demands vary on the investor, as smaller facilities look for space around 200,000 square feet and big hitters hunt for upwards of 1 million square feet.
The Trade War
It’s the elephant in the room that doesn’t know when to quit, and it’s on everyone’s mind. Fortunately, the U.S. Consumer Price Index (CPI) indicates the tariffs on Chinese products aren’t hurting the American wallet.
The ball’s in our court when it comes to how much tariffs will ultimately impact our retail sector. If Americans stop buying, industrial real estate will feel the squeeze.
Another interesting factor that will continue to drive demand for industrial real estate is the further legalization of cannabis. The demand for production and distribution sites will grow as more states legalize medical and recreational marijuana.
However, growth will most likely remain slow-moving as owners are still hesitant to open their facilities up to a still-taboo industry.
DRK & Company’s 50 years of experience will help you effectively invest in commercial real estate. Call 614-540-2404 or contact us online to check out our services or get in touch with our investment team.