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Commercial Trend Watch: Industrial Real Estate Supply & Demand

March 6, 2019
By: Jason Holte

When is one billion square feet of newly developed real estate not enough to satisfy demand?

According to industry expert, Transwestern, industrial real estate demand continues to outpace supply, even with one billion square feet recently developed for this purpose. Transwestern’s report indicates that the industrial real estate market experienced positive net absorption in all but four markets they tracked in 2018. This means that even the massive amount of new space that has come online for industrial use in the last three years is not enough to keep up with the massive demand that exists in this subset of the commercial real estate market. Let’s take a look at this ongoing trend in greater detail.

Distribution Center Exterior - Industrial Real Estate Trend Watch

Why the Demand for Industrial Real Estate?

While many commercial real estate experts are predicting a slowdown in some market segments, industrial real estate is booming. Transwestern attributes much of the demand to e-commerce, with last-mile distribution and supply chain uses skyrocketing. As we noted last November, e-commerce continues to outpace traditional retail spending by an increasing margin. In order to address this shift in consumer behavior, traditional and online-only retailers will need even more fulfillment centers and logistics facilities. If even one billion square feet of existing, available space is not considered enough, what will be?

What Industrial Developers Need to Know

The Transwestern report states that 377 million additional square feet of industrial space is currently under construction in the United States. If the current trend holds, however, even this may not be a sufficient amount. Land developers that are seeking to meet the demand for industrial real estate may find redevelopment projects to be a profitable opportunity.

We’ve explored the concept of adaptive reuse in the past, most recently in regard to the number of retail stores closing nationwide. Aside from the obvious benefit — that these properties house buildings large enough to be used as a fulfillment center — major retail locations are often positioned close enough to major cities and metropolitan areas to be attractive to e-commerce tenants looking to improve their service in specific markets. Property owners may also be receptive to alternative uses for a property where a major retailer has recently closed its doors.

For industrial developers seeking new development or redevelopment opportunities, the ability to identify suitable locations is paramount. Having the right technology solution allows developers to quickly, efficiently conduct due diligence and begin negotiating for their desired properties. Let’s explore how.

How Location Technology & Data Can Help

Using a map-based real estate application, industrial developers can easily search for properties in their target markets meeting all of their base requirements, including lot size, building square footage, land use, and more. A strong location technology solution will also allow developers to add additional overlays such as demographics, traffic data, and hazard data to gain a better understanding of the area surrounding a property, even including whether their target property is located within a qualified tax opportunity zone.

With their target sites identified, developers can also use location technology and data to determine property ownership, then they can leverage financial information including transaction history, assessed value, and nearby comparables as a baseline to enter into negotiations. When all of the data needed for property research and analytics is within a single application, developers can spend less time searching for the information they need and more time planning developments.

Learn More

Over 20,000 real estate professionals trust our location intelligence platform to help them conduct site selection, identify land assemblages, analyze the competition, and manage due diligence efficiently. If you want to learn more about our location intelligence solutions for builders and land developers, schedule a demo of our LandVision™ application or contact us today!

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