Industrial real estate demand reached new heights in 2016, with leasing in excess of 250 million square feet. Many companies have continued to expand, while many others are simply refining their supply chains to be closer to their customers. Low vacancy rates will continue to drop further, and leasing rates will continue to rise. While the continued growth of e-commerce should keep industrial real estate booming, what other factors could impact the industrial sector in 2017? Let’s take a look.
1. Demand for fast delivery
Online shopping and consumer demands for fast delivery are affecting the placement of and the numbers of distribution centers needed to feed the e-commerce appetite. In the second half of this year we saw industrial market’s vacancy rate reach a 16-year low, and this number is expected to continue to decline in 2017.
2. High investor interest
Industrial real estate as a lucrative investment opportunity, with year-end investment sales possibly reaching more than $45 billion. This kind of investment activity is indicative of the commercial real estate sector’s ability to weather a myriad of uncertainties in the global economic, financial and political realms.
3. Urbanization of US cities
Urbanization has led to an infrastructure revival. As upgrades get underway, warehouses will be needed to store the raw materials.
4. Revival of America’s port systems
Demand for industrial real estate will follow the revival of infrastructure and the repurposing of obsolete terminals.
5. The push to improve last-mile delivery services
Smaller urban warehouses and fulfillment centers, and multi-story warehouses in secondary markets could become last-mile solutions for many companies in 2017.
PHOTO CREDIT: Doncram, CC BY-SA 3.0. Click on image to view source
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