Industrial real estate has been a consistent bright spot in commercial real estate, as the market continues to adjust to the realities of a post COVID-19 world. The accelerated shift towards e-commerce, the reconfiguration of supply chains, and the increased focus on resilience and sustainability have created new opportunities and challenges for investors. Locally, Washington DC was the second fastest growing industrial market of 2022 and Baltimore was ranked a top ten market for industrial CRE investment in 2023. So let’s take a closer look at strategic investment approaches for industrial commercial real estate sales and leasing.
Understanding the New Landscape
The pandemic has catalyzed significant changes in consumer behavior and business operations, leading to increased demand for industrial spaces. For example, according to a report by JLL, the e-commerce sector’s exponential growth during the pandemic is expected to increase demand for industrial real estate by an additional 1 billion square feet by 2025. Furthermore, the trend towards reshoring manufacturing to the United States to reduce dependency on foreign supply chains has further boosted the sector.
Investment Strategies for the New Normal
- Focus on E-Commerce Logistics
The burgeoning growth of e-commerce necessitates strategic investments in warehouses and distribution centers. A prime example of this trend is Amazon’s continued expansion, having leased an additional 100 million square feet of industrial space in the U.S. alone during 2020. Properties in close proximity to major urban centers are particularly valuable due to their role in facilitating quick delivery times, a key competitive factor in e-commerce.
- Consider Cold Storage Facilities
The cold storage sector has seen a spike in demand, partly due to the COVID-19 vaccine distribution and the rise in online grocery sales. The global cold storage market size is projected to reach $212 billion by 2025, marking significant growth from $159 billion in 2018. This trend underscores the potential for high returns in this niche yet increasingly crucial market segment.
3. Sustainability and Flexibility
Sustainability is becoming a key consideration for tenants and investors. Prologis, a global leader in logistics real estate, has committed to achieving net-zero carbon emissions across its operations by 2040, highlighting the sector’s shift towards sustainability (Prologis, 2021). Additionally, the demand for flexible spaces that can accommodate a range of uses is on the rise, reflecting the need for adaptability in a rapidly changing market.
4. Technology Integration
Technological advancements are reshaping the industrial real estate landscape. Automated and smart warehouses that incorporate AI and robotics are set to become the norm.Advanced manufacturing represents a large percentage of major pledged industrial investments since 2020, which means the “latest technologies in materials control, artificial intelligence, robotics, and other tools to speed and improve how factories run” (Globest) will be essential to new factory and warehouse development.
Navigating Challenges
Despite the optimistic outlook, challenges such as potential market saturation and the complexities of investing in specialized facilities like cold storage remain. The uneven economic recovery across regions also poses risks to investment returns. Thus, a thorough market analysis and strategic planning are essential, and we can help.
Conclusion
The industrial commercial real estate sales and leasing sector presents a compelling opportunity for investors in the post-COVID era, driven by trends in e-commerce, supply chain reconfiguration, and technological innovation. By focusing on strategic investment areas and staying informed about market developments, investors can navigate the complexities of the current landscape and capitalize on the growth prospects of this resilient sector.
If you are interested in a free broker opinion of value or just learning more about investing in commercial real estate in Maryland, Virginia, or Washington DC, please contact us. Avenue Real Estate is a leading full service commercial brokerage in the Baltimore and Washington DC areas and we would love to help you explore your options and make informed decisions about commercial real estate investments.