The industrial sector is showing it will not waver despite facing challenges that are typically highly detrimental to other sectors. Industrial investors acknowledge that even with high-demand, overbuilding is probable, while the notion of struggling tenants does little to hinder the efforts of conglomerates.
High quality logistics and e-commerce markets are primarily responsible for industrial’s increased exposure. It makes sense that companies are striving to broaden logistics efforts considering e-commerce was healthily on the rise even before the pandemic. For Brian Kim and Blackstone REIT, it’s the logistics properties that are their primary target.
“Blackstone REIT and LBA Logistics recently partnered to recapitalize industrial properties. BREIT acquired a 60% stake in two industrial portfolios owned by LBA Logistics in a deal valued at $1.6 billion. The two portfolios totaled 71 properties and 9.5 million square feet.”
Among others, Duke Realty is making a push with ongoing projects in Chicago, San Francisco, Seattle, Atlanta, New Jersey, and South Florida; Additionally, a 3.1 million square-foot development in Southern California.
And this shows just where the industrial sector is at compared to multifamily or even retail for that matter. Where in multifamily you are starting to see a shift toward medium-sized deals, industrial is still reeling in the billion dollar deals.
At the end of 2020, “US industrial absorption [was] outpacing new supply deliveries. US industrial inventory increased by 2.4% in 2020, while national absorption increased 3.3%.”
The industrial sector is clearly riding on the momentum it culminated 2020 with.
“Some of the most notable recent transactions include KKR’s acquisition of an $800 million 100-property industrial portfolio; Crow Holdings partnership with Allianz Real Estate to acquire a 49% stake in a 19-asset, 6.1 million-square-foot US industrial portfolio developed by Crow Holdings; and Rexford Industrial Realty’s acquisition of an 18-asset industrial property portfolio for $154.6 million.”
Optimism about the market’s recovery will likely fuel bullishness and maintain the fervor for industrial investing in 2021. Yet, the picture doesn’t exactly insinuate ‘trickle-down optimism’ for all of industrial.
Landlords who lease to e-commerce conglomerates, such as Amazon, have little to worry about. But for landlords with pandemic-stricken tenants, the hump can almost be insurmountable.
A host of industrial spaces have gone flat since office work quickly evaporated during the pandemic. Plenty of once burgeoning tenants were the ones supplying professional sports stadiums, movie theaters, amusement parks, restaurants, airports, concert and music halls, all of which have seen dramatic declines.