Executives in US commercial property are bullish on the industrial sector following Donald Trump’s election as President.
New research by Altus Group, NAREIT and NCREIF polled industry leading C‐suite level CRE decision makers on how they would each allocate a theoretical $1 billion in commercial real estate investments to get the best returns for 2017.
This year’s index allocation saw 43 per cent of the total capital allocated to direct real estate investments or private equity, with the industrial property sector the most popular asset type. It received the highest allocation in both public and private equity selections with a 40 per cent year‐over‐year increase in industrial from the private equity selections and a 61 per cent increase in industrial from the REIT side when compared to the 2016 survey. For private equity, the West received the highest industrial allocation at 38 per cent, while the East received 34 per cent, which represents a 108 per cent increase over 2016.
“This suggests strong confidence that the industrial market will continue to outperform as demand drivers remain robust,” says Richard Kalvoda, Executive Vice President at Altus Group.
“The US transition of government has prompted expectations in the industrial and infrastructure sectors and we’re seeing this impact in the survey results,” he adds. “Anticipated tax cuts and increased spending from the New Administration is expected to further strengthen the commercial real estate market in 2017.”
The survey also reveals multi‐family remains a stable asset class as it was the second investment choice among respondents in both private equity and REITs.
US industrial property vacancies fall to record low
7th December 2016
Vacancies in the US industrial property market have fallen to a record low, as the sector defies the usual summer lull.
The third quarter of the year often sees activity slow and, with Q2 breaking records in 2016, a lull was expected by many in the USA. Research from Colliers, though, shows that industrial sector fundamentals instead powered forward, driving the market to record heights. Indeed, e-commerce sales grew 16 percent in Q2 2016 compared with Q2 2015, a rate that dwarfs the 2 per cent overall retail growth for the same time period.
Asking rents rose for the 13th quarter in a row. Nonetheless, net absorption soared to 87.5 MSF, an all-time high for any quarter on record, beating Q2’s previous record of 77.0 MSF, while at the end of the third quarter, only 5.7 per cent of the nation’s industrial space was vacant, the lowest rate on record. Vacancies dropped in 82 per cent of the markets Colliers’ report tracks, compared to the same time last year, despite 62 million square feet of new supply completing in Q3.
“After a slow first half of 2016, an uptick in large portfolio sales helped increase transaction volume to $14 billion in Q3 2016, a 3 percent increase over Q3 2015,” explains the firm’s report. “Single-building investors continue to push into secondary and tertiary markets, with sales increasing 11 percent compared with the same time last year.”
US industrial market smashes records
20th October 2016
The industrial property market in the US is smashing records this year.
The sector has been one of the bright spots in the commercial real estate sector’s recovery this year, with the National Association of Realtors highlighting earlier this year that vacancy rates had fallen to pre-recession levels.
Momentum continued in the second half of 2016, with the market hitting several new milestones in the third quarter, including absorption, vacancy and rent growth.
Defying the slowest economic expansion since World War II, net absorption set a new record in the third quarter, as tenants and owner-users occupied 76.5 million square feet of space, nearly 7 million square feet above the previous record set in the fourth quarter of 2015. In the current expansion cycle, which Knight Frank defines as when absorption turned positive in 2010, industrial properties have absorbed 40.7 million square feet per quarter on average. In the prior expansion cycle, from 2002 to 2008, demand averaged 34.8 million square feet per quarter.
Knight Frank attributes the rising absorption to demand for big-box distribution centres, particularly e-commerce and retail occupiers, a sector that is being led by Amazon. The firm signed two of the five largest DC leases of the third quarter—1.0 million-square-foot-plus deals in Dallas and the Lehigh Valley.
Vacancy ended the third quarter at 5.8 per cent, a 16-year low. The average asking rent across the US ended the third quarter at $5.96/SF triple net, up 1.8 per cent from the second quarter and up 5.9 per cent from a year ago. It was the strongest four-quarter rent gain in the current cycle.
“The recent surge in absorption seems counterintuitive because corporate profits have declined for the past five quarters, with another weak performance anticipated as companies release their third-quarter earnings,” adds Knight frank. “But retailers are spending increasing amounts on their supply chains and e-commerce offerings, which is driving demand for state-of-the-art DCs and fulfilment centres.”
With year-to-date absorption 13 per cent higher than the same period in 2015, the full year’s figures are expected to break records once more, with momentum spilling over into 2017.Google+