The industrial real estate sector has a unique set of qualities that has historically and consistently positioned its assets favorably in the wake of economic downturn. Benefiting from limited obsolescence and limited capital exposure from tenancy and re-occupancy, industrial assets fare well in various economic climates. Regardless of their age, industrial warehouses and distribution centers offer the same utility value. Unlike commercial office or retail investments that are costly, time-consuming to build, and greatly affected by rapid technological upgrades, industrial warehouses continue to stand the test of time throughout the years.
Industrial assets with broad and valuable utility, low risk, high return, and constant appeal have attracted investors for decades, and even more so in recent years as ecommerce continues to propel warehouse necessity. This ecommerce trend has greatly changed the sleepy warehouse of yesterday to a vibrant distribution network of goods. In decades past, distribution centers of 250,000 square feet were considered large and, gradually, distribution warehouses have become larger and more specialized to encompass today’s typical 1 million square-foot asset. In the future, additional expansion in size may be realized in even larger inventory still.
As the COVID-19 experience has changed consumer habits and accelerated ecommerce by roughly five years, industrial assets — specifically infill distribution centers — will remain paramount in real estate. Barring the continued trend toward delivery services and expedited shipping, companies will likely continue to adopt multisource supply-chain strategies while retailers rethink just-in-time inventory levels to accommodate the changing consumer shift. Due to the economic atmosphere in place resulting from COVID-19 consequences, there will also likely be significant trends for onshoring within larger facilities, as we can anticipate manufacturing migrating from distant facilities in China to more closely-linked ones in the United States, Mexico and Canada.Content originally published on Real Assets Advisor.