Today's Industrial Market: What's New?August 20, 2018
The industrial segment looks dramatically different than it did even five short years ago. No longer the “ugly duckling” of commercial real estate, industrial leads the way as changes in technology, supply chain and consumer habits drive demand for industrial property. Industrial is no longer just warehouses and smokestacks. Today, industrial means high-wage, life science research and development jobs. As a result of the increased demand for industrial space, rent growth - which has been on the rise for the past six years - outpaced the three other commercial real estate sectors in 2017. Let’s take a closer look at what is driving industrial demand and the ripple effect it is having locally and beyond.
Drivers of Industrial Demand
The single biggest driver of industrial demand right now is e-commerce. According to the U.S. Census Bureau it accounts for 9.6% of total U.S. sales. Dubbed the Amazon effect, consumer demand for two-day and same-day delivery of goods from online retailers is prompting the development of distribution centers within close proximity to urban populations. As opposed to one large, rural warehouse, leading logistics facility provider GLP’s COO Chuck Sullivan states that “what [online retailers] are actually having to do is acquire a smaller warehouse or multiple smaller warehouses around these major markets.” This is putting a big squeeze on urban industrial space and vacant land.
Advances in technology also directly affect both users and service providers in the industrial segment. Some of these advances include: