The industrial market remains strong, perhaps the second busiest commercial sector right now behind multifamily. But that doesn’t mean that construction in the industrial sector can keep up its blistering pace forever.
That became clear in the latest report from Avison Young’s National Industrial Capital Markets Group.
According to the report, industrial construction volume dipped 5 percent across the nation during the past year. Still, there was plenty of industrial building taking place.
Avison Young reported that there was 188 million square feet of new industrial space delivered in the first three quarters of 2017. That is a bit lower than the 199 million square feet of new industrial construction delivered during the same period in 2016.
And expect plenty of new industrial construction in the near future. Avison Young reported that the industrial pipeline remains strong, with an additional 280 million square feet of space under construction across the country right now.
“Despite strong supply coming online over the past several years, demand for well-located, modern distribution and warehouse buildings continues to outpace supply in many markets,” said Erik Foster, Avison Young principal and the practice leader of the National Industrial Capital Markets Group. “We expect investment pricing for these new buildings to increase moderately over the next 12 months or more.”
Certain Midwest markets did see a jump in industrial deliveries. Memphis, for instance, saw an increase of 67.7 percent, while in Indianapolis deliveries rose 61.69 percent.
The Chicago market, though, saw industrial deliveries fall 31.35 percent. This doesn’t mean that Chicago’s industrial market is on the decline, though. Avison Young reported that the dip in deliveries came after several red-hot industrial years in this area. The company predicted that Chicago will continue to see strong activity and a solid supply of new construction in the industrial pipeline.
Chicago isn’t unlike other markets across the country, all of which, it seems, have enjoyed a strong industrial performance. According to Avison Young’s report, a total of 921 million square feet of completed industrial space has been added nationally since 2012, a strong figure.
Driving this, of course, is the growth of e-commerce. The sector has also benefitted from an expansion in general logistics space as companies adapt to evolving logistics models, shifts in population and overall demographic shifts.
Sales of industrial properties have also been on the rise. Avison Young reported that industrial building sales rose from $4.9 billion during the first three quarters of 2016 to $5.3 billion during the same time period in 2017. Some of the top buyers of U.S. industrial properties during the last two years include Global Logistics Properties of Singapore, which paid $1.07 billion for 25 properties; China Life of China, which paid $936 million for 27 properties; and Gramercy Property Trust of New York, which paid $701.6 million for 21 properties.
Bit deals in the Midwest included Clarius Partners and Wanxiang America Real Estate Group, which sold a 227,000-square-foot refrigerated warehouse at 2357 S. Wood St. in Chicago to Gramercy Property Trust for $62 million in August of this year; and Supervalu Holdings, which bought a 934,490-square-foot refrigerated warehouse and distribution facility at 2600 W. Haven St. in Joliet, Illinois, from Central Grocers in September of 2017 for $61 million.