Will 2019 Set a Record for Industrial Real Estate Sales? – NREI

Both REITs and foreign institutional investors have been very active in the sector.

The current high price tags for industrial real estate don’t seem to be discouraging investors. While total investment sales volume in the sector decreased year-over-year in the second quarter, individual asset sales were up 2.7 percent over the second quarter of 2018, according to a report from real estate services firm CBRE. Total sales volume for industrial properties year-to-date was up by $10.6 billion, CBRE reported.

With current transactions in the works, this year will likely set a record year for industrial sales volume, says Jack Fraker, vice chairman and managing director of global Industrial and logistics with the firm.

One big deal on the horizon is the purchase of Industrial Property Trust’s 37.6-million-sq.-ft. portfolio by Prologis. That deal is valued at $4.0 billion and includes assets in 21 states.

“Smart investors realize this is a great time to make acquisitions in the sector, given the extremely strong fundamentals. Investors are being rewarded with significant growth in NOI and rent growth,” says Fraker, adding that similar to purchasing high-priced stocks with good fundamentals, investors are looking at performance and returns over the long term.

“Industrial has experienced amazing growth in tenant demand, and the forecast is equally optimistic going forward,” Fraker notes. Even with new product coming to market, tenant demand continues to outpace new supply due to growth in e-commerce and other trends, and most industry observers do not see an end in sight.

More than 41 million sq. ft. of new supply was delivered in the second quarter, but vacancy nationally remains historically low at 4.3 percent and asking rents rose to $7.50 per sq. ft, according to CBRE’s second quarter industrial report.

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Written by: Patricia Kirk | August 16, 2019