During a career that has spanned more than two decades, I have learned that the real estate marketplace is not a “one size fits all” proposition. In fact, the converse is true, and I place an especially high premium on the importance of developing sector-specific expertise. My firm not only monitors the overall real estate marketplace but, additionally and perhaps more importantly, we carefully research, monitor and analyze industry trend lines by specific real estate market sector. Clients expect no less.
One market sector enjoying significant growth right now is industrial real estate. Speaking very broadly, this refers to properties that are used for industrial purposes. Less simplistically, however, industrial real estate includes properties that house manufacturing enterprises, handle the production of products, contain research and development operations or serve as large-scale storage facilities. Perhaps the fastest growth that I’ve seen within the sector includes buildings and facilities that handle e-commerce distribution needs. This includes the ever-increasing multitude of Amazon fulfillment centers that are spreading like wildfire both here and abroad.
While our firm is on the leading edge when it comes to micro-targeted market sector research, we certainly do not stand alone when it comes to recognizing the significant upward trend relative to industrial real estate. David Egan, the Head of Industrial Research at CBRE said that he expects the e-commerce real estate sector to continue its robust growth.
While a number of factors are contributing to this sector’s growth, our analysts believe that the continued expansion of e-commerce is the most important driving force behind this upward trend. Because it is widely accepted that e-commerce is slated for significant growth well into the future, it is logical that industrial real estate will grow right alongside it. The continued proliferation of e-commerce (paywall) and the demand for fast delivery (think: Amazon) will continue to fuel the growth of industrial real estate.
You may be wondering whether you too can capitalize on the growth of this market segment. My answer to that question is a resounding yes, and if done properly it has the potential to greatly enhance your bottom-line results. If this market segment appeals to you, my initial advice would be that you become intimately familiar with “all things industrial.” Gaining expertise will stand you in good stead with current clients and allow you to successfully prospect for and land new ones. Because of the sheer magnitude, complexity and unique nature of many industrial real estate transactions, no shortcut should be taken when it comes to your industrial real estate learning curve.
I would also suggest that you take some time to visit industrial properties. This will help you gain a better understanding of this lucrative sector. While there may be very little margin for error in most real estate transactions, the margin is often even slimmer when it comes to industrial and therefore, you owe it to yourself and especially to your clients to ensure that you leave no stone unturned on the path toward industrial real estate expertise.
Although my practice is national in scope, I live and work in Beverly Hills and am therefore intimately familiar with the geographical area. Many clients are surprised when I tell them that the largest manufacturing center in the country happens to be the greater Los Angeles area. This fact was reported by the Los Angeles Times as far back as September 2014, but, of course, when people think about Los Angeles, the entertainment capital of the world, this piece of information is far from the top of the mind. The moral of the story? Well, my final bit of advice is to look around your own geographical area in an effort to glean what the industrial real estate picture looks like where your practice is based. You might just leave your competitors in the dust while you carve out a new specialty for your practice.
The bottom line? Well, if you are the kind of real estate professional or investor who likes to catch a wave as it begins to swell in earnest, then I urge you to give industrial real estate a good, long look. Doing so might add another differentiator between you and others in the real estate profession, and your clients and bottom line might just be the better for it.