Investors jump in early in industrial sector
March 28, 2022 | Arleen Jacobius | Pensions & Investments
Increased demand makes warehouses attractive even before they are built or leased
The already hot industrial real estate sector is burning up with demand that’s so fierce investors increasingly are competing to buy warehouses before they are built or leased.
Traditionally, investors were loath to take on development and leasing risk, preferring to buy warehouses when completed and with tenants in place. But industrial rents are rising quickly — with first-year comparable rents up 10.8% in 2021 from a year earlier, according to CBRE research — and consistent growth in leasing rates is causing investors to be less concerned with those risks.
According to MSCI Inc.’s RCA Commercial Property Price Indices, industrial prices rose a record 28.1% in the 12 months ended Jan. 31. That’s faster than the growth in any other property sector in the period, besting apartments’ 22.5% increase.
Real estate executives say the industrial properties segment still has room to grow.
“If you take any kind of view of the world that there could be reversion to the mean, it points to a peak,” said Richard Kleinman, Chicago-based head of LaSalle Investment Management’s U.S. research and strategy group and co-CIO for the Americas. But investors expect rents to continue to rise and, so far, they have been right because supply has lagged demand, Mr. Kleinman said.
