Industrial commercial real estate (CRE) space fundamentals remain strong despite increasing construction costs. The demand for modernized industrial space is showing that despite these cost increases, the e-commerce fueled demand is keeping industrial warehouse space rents rising. Dallas-Fort Worth, the Inland Empire, Chicago, Atlanta, and Houston led the pack in industrial space under construction during Q1, 2021. The Urban Land Institute projects industrial rent growth to increase by 4% in 2021. In 2022, ULI projects 3.7% growth followed by 3.1% growth in 2023. Moody’s Analytics also predicts that industrial commercial real estate will have the highest rent increases of all asset classes this year.
While the common perception is the pandemic hurt all commercial real estate, that is simply not the case. Well located industrial space is clearly a winning asset class for industrial owners and investors. If you simply watch some of the top players doing acquisition and new development, the optimism for the future of industrial space is clear.
The Leaders in Industrial Commercial Real Estate Space
Several companies are taking the lead when it comes to industrial real estate acquisitions and furthering new developments within the space.
One such company well known in this asset class is CenterPoint Properties. CenterPoint acquires, manages, and develops premium industrial real estate. The commercial real estate it acquires is located near major transportation hubs, mainly focused on trucking infrastructure, large rails, and ports. It also helps government agencies create elaborate development projects, taking advantage of its security clearances that allow for projects to start faster. Their creative use of proprietary technology, innovative financing techniques, public and private partnerships as well as other innovative methods allows CenterPoint to provide their customers with a competitive edge to ensure their success. Since the first quarter of 2020, they have made over $1.3 billion in investments.
Another leading entity in the acquisition and new development of industrial real estate buildings is Dermody Properties. They have established themselves as veterans in the industry focused exclusively on developing, acquiring, and managing logistics, e-commerce, and industrial real estate for the past 60 years. Most recently Dermody closed its third commingled fund. Dermody Properties Industrial Fund III, L.P. (DPIF III) is a $1.1 billion fund comprised of previous investors along with new investors ranging from insurance companies to public and corporate pension funds. With momentum from its latest raise, Dermody Properties looks to continue to be a leader in this industry by acquiring, developing, and operating Class A, logistics-focused properties throughout critical hubs in the United States, per Les Shaver from Globe Street.com.
With properties in the Americas, Asia, and Europe, Prologis is also one of the top logistics real estate providers. Leading with its industrial real estate development experience, the Fortune 1000 company has acquired billion-dollar all-stock commercial real estate. It has also worked with companies such as Allianz for huge real estate investments. One service they provide is to suit industrial real estate properties to customers’ specifications and use renewable energy to promote a greener industrial environment.
Conor Commercial Real Estate focuses on community-driven real estate development. Their commitment to honesty and integrity is what has allowed them to build their reputation as a transparent developer in various asset classes, from industrial space to office space to multi-family and health care.
And of course, real estate icon Sam Zell’s announcement earlier this month that his REIT, Equity Commonwealth, is buying Monmouth Real Estate Investment Corp, a company that holds high-quality, net-leased industrial buildings, for $3.4 MM is quite a statement that Sam Zell who is known as the “grave dancer” and a visionary, clearly sees bright skies on the horizon for this asset class. Industrial real estate is no longer a simple search for “warehouse space for lease” or “warehouse space for sale”!
Technology Is Transforming the Industrial Real Estate Space
Innovation is revolutionizing the CRE industry and how real estate development is managed with companies such as those included above are creatively using proprietary technology and brownfield remediation models to stay a step ahead.
A few trends have become noticeable in CRE in 2021. Digital twins have emerged thanks to the mass data collected by the commercial real estate industry. Using data about the CRE building that’s being acquired as well as the Internet of Things (IoT) regarding building operations improves the efficiency as well as experiences of occupants.
Data and analytics are increasingly being relied on, especially with behavioral patterns and demand changing frequently. Industrial real estate companies use analytical data to inspect the risks and opportunities any demand and behavior changes present.
Artificial intelligence (AI) and robotics are being increasingly used. Leveraging technology is infamously slow in CRE and regularly tests the patience of those involved with CRE projects. Robotic process automation has sped up this process for companies. Companies use automation to reduce costs and boost the efficiency of day-to-day operations. Machine learning has also become a go-to digital transformation tool for industrial real estate companies to analyze building layouts during property management. AI can also help commercial real estate brokers with lead generation to help lease these properties quickly.
More Sustainable Technology Is Being Relied Upon
Another noticeable trend in industrial real estate development is the emphasis on introducing sustainable technology that makes properties safer and better optimized. More CRE entities are looking at improving energy efficiency, solar power, environmentally friendly roofing, and other technologies that boost value for investors and owners.
A tenant’s decision regarding a commercial real estate lease going forward could depend more on how many of these technologies are installed. They are cost-saving and are seen as major assets that will make buildings considerably more attractive to occupants.
Industrial real estate continues to evolve, and technology has made industrial space and warehouse space more sophisticated. To learn more about how the CRE industry continues to grow and to find space in your market, join us today!