Observations of Industrial Real Estate Trends
Real Estate Trends – The Good
Intense industrial real estate trends and conditions are diminishing. There are fewer container ships waiting to unload. The cost to ship a container from Shanghai to Los Angeles is 30% lower from its high. Building rents are still increasing but the doubling during the Covid-19 period was an aberration. While signs of a hyper-market are departing, a strong industrial market remains. There is a deficit of available space, strong corporate demand to improve supply chains and manufacturing resiliency, e-commerce, and high investment flow. Rent surges will continue with holiday stocking schedules starting in the Summer and again later in the year when China re-opens from its Covid-19 lockdown.
Real Estate Trends – The “Bad”
While all categories of space are in short supply, a scarcity of free-standers is particularly acute. Many industrial businesses require their own space with exclusive access. For security and operational reasons, they cannot share. Ideal sizes generally tend to be 40,000 to 75,000 SF before companies look outside of California. In the past 15 years, economies of scale pushed developers to building larger bulk distribution buildings neglecting the free-standers.
Corporate real estate continues to be a source of property sales. While leasing yields better financial accounting results, many corporations still own sizeable industrial property properties. When business strategies change or sales decline, real estate can create an unexpected windfall. Most corporate sellers want an expedient sale, normally discrete, and at the appraised price. There’s often a pressing need to reinvest those funds at a higher return.
We use research to find corporate owned properties and time our offers to add value; developing most of the tools ourselves. We recently moved our off-market industrial real estate business to a decentralized format. All files and documents are sent on the blockchain to give buyers and sellers more privacy. While most corporate users are already familiar with blockchain, it’s the wealthy private parties that appreciate the discretion the most. We are currently in the process of enhancing our security for trusted parties before fully utilizing our decentralized information.
Our specialty is industrial real estate in the Los Angeles area but we can act in other part in the United States, Canada, and Mexico with our SIOR colleagues. Our customers include local and national investors, developers, corporations and private parties.