Industrial properties have experienced unprecedented growth in demand over the past several years as both new and old companies seek to find space. This shift has benefited industrial assets in many metros across the country, although investors may unintentionally limit their focus to the markets with the most outsized gains. Smaller cities can provide equally compelling investment opportunities due to some unique advantages. Multiple factors combine to create such a scenario in Pittsburgh. The city is home to several prominent educational institutions, healthcare providers and technology companies that are fueling job growth, thus dropping the unemployment rate to its lowest in two decades. Opportunities in these high-wage industries are bolstering the metro’s median household income and improving retail sales. Consumer spending is projected to jump 4.4 percent in 2019, about 100 basis points more than last year. As shopping activity expands, the need for distribution centers is becoming more acute. Together with an established manufacturing sector, both sources of demand are supporting the absorption of industrial space. More tenants moving in are enabling properties to perform at a greater level. The metro’s vacancy rate has declined 400 basis points since 2009 and is now under 6 percent. Availability is lowest …
For many years, San Antonio’s industrial sector was considered, at best, a lower-tiered secondary market for investment of institutional capital. But over the last 18 to 24 months, this market has seen a major increase in the amount of institutional funds competing for placement. According to the latest research from JLL, during the last 24 months, institutional buyers have acquired approximately 11 million square feet of industrial real estate in San Antonio. This investment activity translates to more than $700 million in value, inclusive of entity-level transactions. These figures represent nearly a 200 percent increase in the annual volume of sales in San Antonio compared to the previous 24-month period. The investor pool runs the gamut in terms of where buyers are headquartered. Property owners are fielding demand from institutional capital sources located all over the country, including international capital sources, as investors continue to chase better yield within the red-hot sector that is industrial. Supply of high-quality product has struggled to keep pace with the growth of institutional demand, mainly because the influx of capital has been so strong in such a short period of time. But the market is still seeing steady growth in the development and absorption …
We all know that e-commerce has become a significant driver of the industrial market. It now fuels activity that moves beyond clothes and books to the food supply chain, and the associated complexities of meeting consumer demand for food preparation and delivery. Increasing numbers of consumers have shifted to buying prepackaged meals, shopping for organic foods or ordering groceries and meal kits online. This expansion is translating into significant demand for industrial warehouse and distribution space to accommodate the food industry. One sector of this robust market is facing challenges, however, as demand for cold storage warehouses has skyrocketed in recent years. These facilities are used to store fresh and organic produce and to create and distribute processed foods. Food businesses are typically looking for spaces near large population centers as they seek to tap into demand for last-mile delivery. The cold storage shortage is playing out in many markets across the country, but is particularly problematic in New Jersey due to a low vacancy rate and the construction challenges in this sector. Driving Location Decisions Food businesses are looking for spaces near their customer bases to reduce travel times, so they often choose infill locations. The scarcity of land …
The U.S. industrial market has now recorded more than 240 million square feet of net absorption for four consecutive years, the strongest run on record, with an all-time high of 284.9 million square feet in 2018, according to Cushman & Wakefield. In New York City, the largest consumer market in the United States, the current industrial supply of approximately 170 million square feet remains heavily constrained, especially around the region’s transportation hubs. Nowhere is the demand for industrial product more apparent than in the area surrounding John F. Kennedy Airport in Queens, which handles more than 1.3 million tons of air freight every year, according to the Port Authority of New York and New Jersey. JFK is the second busiest air cargo airport on the East Coast behind Miami International Airport and just ahead of Newark International Airport. “There’s really not a lot of land near JFK,” says David Hercman, director of asset management at Long Island-based Milvado Property Group. “So, whatever supply is there is there.” Time-sensitive industrial users like freight forwarders, which organize shipments from manufacturers or producers overseas, need to be close to the airport in order to get products to the end user as quickly as …
The agriculture industry, long an economic staple of the Rio Grande Valley (RGV), has been at the forefront of the region’s industrial expansion and is seeing its role elevated with more product coming from Mexico. Over the last several years, road and bridge infrastructure improvements throughout Mexico’s southwestern regions have laid the groundwork for increased traffic of produce-carrying trucks headed northeast to the border area. Ports of entry throughout the RGV have become the top destinations for agricultural imports, surpassing the longtime leader of Nogales, Ariz. This has heightened cross-border trade activity throughout the South Texas ports of entry. Most notably, the Pharr, Texas, port of entry has increased the most in terms of activity, which has led to greater absorption and development of industrial product throughout the McAllen metro area. The prime example of this infrastructural development is the Baluarte Bicentennial Bridge. The 3,700-foot, cable-stayed bridge opened in 2013, connecting the Mexican coastal city of Mazatlan to the inland port of Durango and shortening delivery times for product en route to the U.S. border by four to six hours. As a result, a significant amount of the new industrial development in recent years has centered on cold storage facilities. …
Businesses and industries whose supply chains are tied to Port Houston are dealing with tariffs on select imports, volatile energy markets and a one-two punch of rising rents and construction costs for any industrial space they want to lease or have developed for them. But based on the performance of Houston’s nearby Southeast industrial submarket, these larger geopolitical and economic forces are wreaking minimal havoc. An increasingly diverse mix of industrial users has landed in Houston over the past five or so years. These tenants include national retailers and third-party logistics (3PL) firms that see Houston as an emerging regional distribution hub, as well as suppliers of durable consumer goods and companies that service the petrochemicals industry. The port submarket is seeing heightened activity from all of the above. At the same time, the infrastructure within Port Houston has expanded. Ship channels are in the process of being deepened and widened. Special equipment has been introduced that allows overweight containers to safely and legally leave the port and hit the roadways. Demand for rail-served properties is growing, particularly on the north side of the Houston Ship Channel, leading to more of those projects. And Harris County has begun work on …
The current pace of development and absorption of manufacturing and warehousing space in El Paso reveals just how closely the local economy is linked to that of its sister city across the border, Ciudad Juárez. Mexico’s maquiladora system allows foreign companies to produce and export materials to that company’s home country, largely on a duty- and tariff-free basis. When the North American Free Trade Agreement (NAFTA) was passed in the mid-1990s, maquiladora activity saw its largest historical increase while still facing considerable competition from China for foreign investment. But when American manufacturers realized that outsourcing production to China didn’t translate to more efficient supply chains, they once again looked toward Mexico, which also boasted strong supplies of affordable labor. With the United States now locked in a trade dispute with China, the economic development initiatives offered by the current Mexican Presidential Administration and the threat of a drastically renegotiated NAFTA agreement having passed, American companies are beginning to return to Mexico. Ciudad Juárez is among the Mexican cities benefitting most from this activity, and it is translating to greater demand for storage and distribution space in El Paso. Many maquiladora companies count end users in southwestern U.S. markets as significant …
Even before the city’s population growth began exploding and its reputation as a tech hub became entrenched, Austin was always a true last-mile market for industrial users. Now that e-commerce has morphed into a worldwide phenomenon with real staying power, Austin looks like one of the next ideal locations for institutional industrial developers to make their marks with larger projects. However, the market does present a handful of challenges, including an intricate entitlement process, expensive land and a slightly higher cost of construction as compared to Texas’ other major markets. These barriers to entry have helped characterize the Austin industrial market we see today, with local developers leading the way. The Austin Market Today From both a developer’s and a broker’s perspective, the biggest advantage of being in a high-barrier-to-entry market, aside from less competition, is that the likelihood of becoming overbuilt is minimized. We saw this in 2008 and 2009, when the recession forced industrial users to cut operating costs and landlords to lower rents. Like the rest of the country, Austin took some hits during the Great Recession and saw a handful of properties foreclosed upon. But due to minimal new development, the market was able to maintain …
Fueled by continued population growth that has made Columbus the 14th-largest city in America and its strategic location in the U.S. Interstate system, the Columbus industrial market has been on a multi-year run in terms of new inventory and positive net absorption. Given the fact that drivers are able to reach approximately 50 percent of American households and 30 percent of Canadians within a one-day drive of the city, we see no end in sight for these market trends. That one-day drive statistic has made Columbus one of the country’s leading e-commerce distribution markets. Also, according to a recent ranking by Realtor.com, the metropolitan area is the only large northern city to grow its population by more than 10 percent from 2010 to 2017. The company also reported that Columbus was the fourth-hottest housing market based on the number of hits each listing receives and time on the market. Further, the central Ohio region’s business-friendly environment encourages developers to build in designated areas, and it is working. At the close of the fourth quarter last year, 5.7 million square feet of new industrial product was under construction. The overall vacancy rate for the Columbus industrial market was 4.8 percent, which …
The combined forces of population growth, increased online shopping and demand for last-mile fulfillment centers are driving development of and investment in industrial assets in major markets. Natural population growth translates to more aggregate demand and consumption of goods and services. The rise of e-commerce has guaranteed that a growing percentage of those products will be ordered online and delivered to end users within a few days, hence the need for more fulfillment and distribution facilities near major population centers. The metropolitan statistical areas (MSAs) of Dallas-Fort Worth (DFW) and Houston are home to a combined 13 million or so people and counting. Both MSAs have seen major upticks in industrial development over the last several years while also posting record absorption numbers. And despite some vast differences between the industries and users driving demand in DFW and Houston, both markets reflect how sweeping changes in consumer behavior have elevated the fundamentals of their industrial real estate inventories. Regardless how different their economies are, demand for space in both markets should remain robust in 2019. By The Numbers According to CoStar Group, DFW posted positive net absorption of approximately 20 million square feet in 2018, a year in which inventory …