April 7, 2020
There are some positive signs as the commercial real estate industry works to navigate the COVID-19 pandemic. Many believe industrial real estate can weather the storm. Here are a few recent examples:
While the U.S. supply chain has been put to the challenge in recent weeks, there are long-term signs of the resiliency of logistics real estate. According to a Prologis report, continued e-commerce adoption, diversified manufacturing locations and other factors point to a positive long term view.
Among the key indicators are: rising inventory levels, continued adoption of e-commerce (particularly in this online grocery shopping frenzy), and the diversification of manufacturing locations.
Amazon Still Leads Industrial Real Estate Activity
Fully leased Amazon facilities continue to attract investors, as noted in this GlobeSt. story. Industrial Logistics Properties Trust closed on the final property of its $680 million joint venture with an Asian institutional investor by acquiring an Amazon leased warehouse in Ruskin, FL. The 12 properties total 9.2 msf across nine states.
Industrial Investment Returns Should Outperform
Tenant demand for new industrial space hasn’t slowed significantly in the wake of the coronavirus, according to Pensions & Investments. The market could see pressure on returns, but the sector is expected to continue to outperform other investment options. Warehouses earned 13.4% returns in 2019 and were the only sector with double digit returns, according to the NCREIF Property Index. While new warehouse construction and increasing rents may cause a short-term lag, the long-term outlook is positive.