Kellie Rastegar is Co-Founder and Creative Director at Rastegar Property Group.
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Industrial real estate as an asset class has been among the most resilient during the pandemic. With the exponential increase in e-commerce demand due to social distancing requirements and public safety concerns, it’s no surprise that the sector has had such a stellar performance over the past year. But, despite e-commerce growth, disruptions in supply chains have put on a lot of added pressure and really underscored the vastly increased need for industrial real estate across the U.S.
With the Sun Belt on track to benefit from some of the fastest population growth in the nation, much of the industrial market expansion will likely be taking place in this region to compensate, although the U.S.’s traditionally large metros will still see the benefits of the massive e-commerce boom as well. Texas is chief among those creating opportunities for investors with its rapidly growing cities and close proximity to production facilities located in Mexico. Also driving Texas’ rally is the continued influx of businesses like Tesla, Oracle, Google, Hewlett Packard and more — all of which will need new or expanded facilities in various parts of the state.
Recent estimates put the demand for additional industrial real estate at more than 1 billion square feet of new space by 2025. With many asset classes like retail and hospitality struggling to survive during the pandemic, many investors have already decided to capitalize on this increasing demand for industrial real estate properties. In short, industrial, alongside multifamily, is among some of the few real estate verticals being seen as a “haven” for investors during the global pandemic. Of course, as a result, more investors should be looking for opportunities in industrial real estate if they also hope to benefit from the sustained growth of e-commerce.
Not only is this upcoming boom positive for investors in industrial real estate, but it also likely heralds good news for most other real estate asset classes as well. Along with industrial additions, increased e-commerce business means more jobs in the local economy which, in turn, means more home renters and buyers coming to the area, as well as an uptick in local retail and hospitality businesses. These investments to create industrial logistic hubs across the Sun Belt will likely be a much-needed boost to the recovery of local economies as many who’ve faced joblessness and isolation in the pandemic try to return to a more normal everyday life.
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The growth of industrial real estate and the increased demand for it effectively will raise those asset classes around it. As the saying goes, a rising tide lifts all boats. Particularly, with vaccine rollouts and many people still fleeing large metros like New York and Los Angeles, workers will be eyeing jobs in industrial hub cities. This influx of workers will act to further boost the growth of local businesses and rental markets, and the benefits don’t stop at new constructions. For those real estate investors with existing properties, a conversion might be in your future, as some savvy investors have already done.
Properties like malls across the U.S. have been struggling for years, and with the pandemic accelerating closures, these vacant properties make ideal conversion properties for industrial. Malls with their vast amount of open-plan floor space and built-in parking structures make a conversion to industrial a breeze as they come equipped with many already existing features. Malls also are typically located near major highways and thoroughfares for ease of access, adding to their conversion appeal.
The upwards trajectory of industrial real estate is solidly growing. Unlike some asset classes that struggled during the pandemic, industrial has been an expected investment hero. What this means for real estate investors is that time is of the essence. In order to capitalize on growth, real estate investors will need to jump on opportunities to construct new industrial hubs or convert existing properties. Real estate investors should also map out areas of focus, like parts of Texas, the Carolinas and Arizona. Those geographical areas that will benefit from an industrial real estate boom will also be likely to see an uptick in other real estate asset classes through the influx of jobs provided by the new industrial hubs.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
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