How The Pandemic Changed Industrial Property: Trends In The Industry


Lane Kawaoka is a Podcaster for SimplePassiveCashflow.com & Real Estate Syndicator of 1B AUM (7500+ rental units)

We’ve seen the rise of e-commerce over the years as the pandemic caused rapid growth in the industry. In 2020, what should’ve been done in five years was compressed into a few months. An increase in online shopping, migration of people from cities, increase in transportation costs and volatile consumer behavior all helped give the e-commerce industry a boom.

But does this demand correlate to industrial properties now and in the future?

Within industrial real estate, you are in a never-ending battle with supply disruption, changes in customer retail habits, choices between remote or in-office setups and dynamic residential migration. As an investor, you might wonder why you shouldn’t just focus on multifamily properties when this segment is a proven and tested strategy for investment. While multifamily is a great area to invest in, I see industrial property investment as a diversifying asset class that will continue to grow in its connection to the e-commerce industry and other areas.

Even with signs of continuing easements of pandemic restrictions and people visiting retail shopping malls and going back to a face-to-face office setup, the convenience of online stores, the benefits of manufacturing property spaces and the flexibility of things like a showroom will not be neglected.

ALSO READ:  How To Charge Customers 10X For Your Startup’s Offering

Industrial Property Defined

The industry of supplying properties for nonpublic industrial purposes is known as industrial real estate. Industrial properties are seldom accessible to the public and are used for behind-the-scenes operations. These properties are typically large and include warehouse buildings for storage, manufacturing facilities and showrooms. While industrial property is oftentimes mistaken for commercial property, they are two different entities. Industrial properties are not exposed to the customer, so there’s no need to develop the interior and exterior to look appealing to the tenant.

Below I hope to outline some trends for those interested in this area of real estate.

Research And Life Science

Besides the current e-commerce trend, new developments show that even the science sector is diving into the industrial real estate arena. In fact, like in many areas of real estate, it is hard to keep up with current demand, and there is a lack of available spaces for labs in many areas.

At the start of the pandemic, there was a desperate move to quickly come up with a solution for Covid-19. With the continuous research for vaccines and drugs, expansion of laboratories required storage for specimens and need for highly specialized buildings; this demand is anticipated to continue.

ALSO READ:  Predictions On The Future Of Airport Travel Post-Covid From A CEO In The Industry

In watching this trend, changes in medical technology may prompt the need for smaller labs that undertake limited work; related, some corporations may shift away from a single centralized research center to several other smaller ones closer to residential areas.

Shifting On-Shore Manufacturing Preferences

Because of the delay in shipping and ever-increasing tariffs still resulting from the pandemic, many corporations have realized how essential and cost-driven the supply chain is. In fact, two-thirds of North American corporations want to move at least some of their manufacturing and sourcing back to their nearby location. I see this as resulting in an improved job market while increasing demand in the industrial space, especially now that huge space is necessary to promote adequate social distancing.

E-Commerce And Hurdles To Overcome

Interest in industrial real estate is increasing as the world of e-commerce broadens and enlarges. Distribution firms are busier than ever, and they require space to store goods and coordinate shipment routes. Building development of massive industrial complexes demonstrates that the global economy and consumer demand for industrial real estate are on the rise.

While I believe there are many benefits to investing in industrial properties, you should acknowledge some of the risks. If companies, especially large ones like Amazon, decide to find new ways to ship or if they decide to change routes and not need certain warehouses anymore, this can drastically change the market. As I hinted at earlier with things like supply disruption and changes in customer retail habits, certain parameters of industrial real estate are outside of your control.

ALSO READ:  What I Learned While Expanding My Spa Business During Covid

Taking Advantage Of This Demand

In order to best take advantage of this demand, track where the people are migrating and check the industrial property market in those areas.

For example, many people from California are migrating to Atlanta or Houston. Where there is an increase in migration, you’ll likely see an increase in commercial and industrial properties as well. My main prediction is that in the coming years, warehouses will largely locate to regional areas, which will allow them to be closer to their consumer. This will tie the properties’ values closer to other real estate types and the higher rents that are occurring.

Overall, I hope by understanding these trends in industrial real estate, and how it differs from areas like commercial real estate, you can make better-informed investment choices.


Forbes Business Council is the foremost growth and networking organization for business owners and leaders. Do I qualify?




Source link

Follow Us

Follow us on Facebook Follow us on Pinterest