The industrial market has been so hot for so long, it’s easy to assume that this sector will continue booming for years. But a forecast published yesterday by the Deloitte Center for Financial Services casts some doubt on just how much growth this sector will see during the next three years.
The Deloitte forecast predicts that during the next three years, the annual demand growth rate for industrial real estate will decline to just below 0.9 percent. That’s about one-half of where this figure stood in 2018.
Why is Deloitte predicting a dip? First, it’s not easy to sustain the kind of demand that industrial has seen during the last several years. Cities across the country and the Midwest are setting records for industrial construction and occupancy levels. That kind of demand can’t continue forever.
Deloitte also pointed to rising interest rates, the increasing cost of capital and an oversupply of industrial space as other factors that will slow the growth in this sector.
Of course, this doesn’t mean that the industrial sector is heading for a crash. Deloitte still predicts that the demand for industrial real estate will rise during the next three years. It’s just that this demand won’t rise at the same levels the market has seen for the last several years.
Deloitte predicts that the demand for industrial real estate will increase by 850 million square feet to 14.8 billion square feet by 2023. A key driver will be a predicted 15 percent annual growth rate in e-commerce sales.