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4 Reasons Why the Industrial Real Estate Sector is Growing

October 26, 2016

Learn why industrial real estate may be a better investment than you think.

While it has largely flown under the radar, the industrial real estate sector is growing at a steady clip. The financial and professional services firm JLL recently issued a wide array of data that paints a positive story for the industrial sector, including:

  • Warehouse rents are expected to increase for the sixth year in a row, with the average asking rent at $5.01 per square foot on a triple-net lease (a triple-net lease is a lease in which the tenant is responsible for paying all operating costs associated with the property)
  • Average rental rates are projected to rise by 4.5 percent
  • U.S. vacancy of industrial real estate is currently at a 15-year low of 6.3 percent
  • The industrial vacancy rate is expected to remain around 6 percent in 2016, despite more than 130 million square feet of new construction slated to be finished this year

These statistics seem like great news for the industrial real estate market. And there are additional trends that point to continued growth:

E-Commerce is booming

If you think back to the last few items you purchased, how many were purchased via the Internet? If you’re like most Americans, you’re buying more and more products online, which is great news for the industrial real estate market.

Large online retailers like Amazon, Wal-Mart, and others are continuing to see major growth. This growth requires larger warehouses, strategically placed around the country, to ensure customer orders are handled and shipped quickly and efficiently. In the second quarter of 2016, online sales accounted for just 8.1 percent of total retail sales, showing the massive opportunity that online companies have to capture even more sales over the coming years.

Rebounding economy

After the global recession of 2007, it has taken quite a few years for real estate and other sectors to rebound to pre-recession levels. Commercial and residential real estate are growing in most major markets across the country, which is good news for investors looking to grow their portfolios.

Construction costs are climbing

Another benefit for property investors who own existing industrial real estate is the fact that construction costs continue to climb. With the rising costs, companies are more apt to lease industrial space as opposed to build, which helps investors fill unoccupied space and generate more income.

Low vacancy rates

As mentioned above, the low vacancy rates in industrial real estate mean that now is a good time to be an investor in industrial real estate. With current demand, investors would be hard-pressed to find a better option in the real estate sector.

Looking for help navigating the industrial real estate market?

If you’re a seasoned industrial real estate investor, or someone who is just starting out, the team at Morris Southeast Group can be your advocate. With decades of experience in the South Florida real estate market, we can help you find opportunities in the area’s industrial space. For more information, feel free to reach out to our team today at 954.474.1776, reach Ken Morris on his cell at 954.240.4400, or email kenmorris@morrissegroup.com.

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