Powerful Industrial Wave is Far from Over!

Powerful Industrial Wave is Far from Over!

 

Industrial investors are concerned about the sustainability of this asset class's top ranking. Interest rates have caused some pullback in the market. However, in my view this will be temporary as we're already seeing the gap in expectation between buyer and seller narrow. Given the popularity of industrial assets, we can expect an increase in transactions as more equity is invested in the industry, either for portfolio balancing or simply to participate in the market.

There is currently some oversupply, particularly in major markets in the short term, the construction supply pipeline is expected to slow down. In 2023, an additional 550 million square feet of industrial space will be delivered, which will exceed absorption for the year and slightly raising vacancy rates. However, from 2024 onwards, the average delivery per year will decrease to 200 million square feet and give things time to balance out.

Interest rates have undeniably had an impact, as on average, cap rates have shifted by 75 to 150 basis points. This means that some deals are trading with negative leverage. Some assets are currently being traded with negative leverage due to various factors, including the asset's rent relative to the market and the speed at which those rents can be achieved. Another consideration is the purchase of new properties. There is a widely held belief that construction costs will continue to rise, and therefore, buying a new asset today locks in a lower basis compared to future properties.

Anticipation of moving rents in the near term or purchasing a brand-new property at a low basis are the reasons why industrial assets are traded with negative leverage. Additionally, the increasing construction costs contribute to upward pressure on interest rates, especially when the supply of new properties is expected to decrease.

In summary, the interplay between location, configuration, and existing rents are the main forces when considering industrial assets. Buying now allows investors to secure a lower basis compared to future construction projects, taking advantage of the anticipated increase in construction costs and potential interest rate hikes.

If you are in need of an experienced commercial real estate broker I can be reached at 281-222-0433, or you can visit here to schedule a consultation: https://calendly.com/vikingenterprise

 

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#Commercial Real Estate Broker #Commercial Leasing #Commercial Lending #Structured Finance #Commercial Sales #Commercial Real Estate Investment #Commercial Real Estate Development #eXp Commercial – Viking Enterprise Team #Agent Attraction

If you are in need of an experienced commercial real estate broker I can be reached at 281-222-0433, or you can visit here to schedule a consultation: https://calendly.com/vikingenterprise

https://www.houstonrealestatebrokerage.com/

https://houstoncommercialmortgage.com/

https://www.houstonrealestatebrokerage.com/

https://houstoncommercialmortgage.com/

https://www.tenantbase.com/advisors/bill-rapp/

https://www.billrapponline.com/

https://findamortgagebroker.com/Profile/WilliamRappJr28883

https://doctorvideo.billrapponline.com/

https://veteransvideo.billrapponline.com/

https://mortgageviking.billrapponline.com/

https://fha203h.billrapponline.com/

https://renovationvideo.billrapponline.com/

#Commercial Real Estate Broker #Commercial Leasing #Commercial Lending #Structured Finance #Commercial Sales #Commercial Real Estate Investment #Commercial Real Estate Development #eXp Commercial – Viking Enterprise Team #Agent Attraction