July 9, 2020 – “Industrial is, has been and will continue to be more resilient than other real estate property types.”
That’s how Kate Nolan Bryden, Senior Vice President of MRP Industrial, summarized speakers’ comments and key takeaways from the recent NAIOP I.CON Virtual 2020 industrial conference which attracted more than 1,100 professionals. The ongoing demand for warehouse/industrial space, she said, is being driven by the rise in reverse logistics, cold storage facilities and e-commerce spending. The full video can be viewed at https://vimeo.com/433639365.
“The shift to e-commerce is accelerating. CBRE had previously predicted that more than 30% of all sales will be transacted online by 2030,” Nolan Bryden explained. “That figure has recently been revised to 40% of all sales by 2025. And, for every 100 basis points of movement to online sales, approximately 46 million square feet of industrial space is needed.”
That trend is both driving demand for distribution facilities and centers that handle returns.
“No segment of the market is growing faster than the reverse logistics category, as an estimated 30% of all merchandise purchased online is returned,” Nolan Bryden said.
“A separate CBRE report suggests that 75 to 100 million square feet of industrial freezer/cold storage will be needed over the next five years. In addition to storing frozen food, this boutique space is used for warehousing airplane parts, raw materials and, specifically, biopharmaceuticals,” she said.
According information presented at I.CON, the pricing for warehouse/industrial product in Tier I markets has returned to pre-COVID-19 conditions and debt availability is expected to return this summer. Deals under $20 million still comprise 80% of the market and there has been no discernible increase in the level of distressed asset sales. The industry can also expect to see some design changes to industrial buildings, including taller buildings with ceiling heights up to 140 feet and greater power requirements.
“The demand for durable goods has been exceptionally strong over the past several months, and as CBRE’s Spencer Levy said in his remarks to open the conference, the economy appears to be exhibiting a V-shaped recovery,” she concluded.
In the June 24 edition of NAIOP-MD 360, Levy, Chairman of Americas Research and Senior Economic Advisor said, “Every trend favors industrial and they are the net winners from the pandemic. Secular shifts have benefited this market with the growing popularity of online shopping and the demand for industrial space continues. Our long-term forecast for industrial is brighter now then it was in January of this year.”