Artículo

Industrial investment breaks records, changing the landscape

Industrial transaction volumes exceeded $100 billion in 2019 for first time in history

febrero 25, 2020

A series of major transactions in the U.S. industrial market consolidated the ownership landscape and fueled a record-setting year for investment in the sector as competition for a slice of the e-commerce pie increases.

Industrial transaction volumes in the United States exceeded US$100billion in 2019 for the first time in sector history, according to JLL Research, with investment boosted by a number of mega deals.

In June, Blackstone Group LP purchased a 179 million-square-foot portfolio of U.S. industrial assets from Singapore-based logistics provider GLP for US$18.7 billion — the largest private real estate deal in history. The real estate giant also bought a 60 million-square-foot industrial portfolio from Colony Capital and a 4.7 million-square-foot collection from TA Associates Realty’s Fund X throughout the year.

The unprecedented transactions have dramatically changed the ownership landscape with Prologis and Blackstone now representing almost 1 billion square feet of industrial space in the first quarter of 2020, more than next 15 biggest owners combined, says Peter Kroner, Manager, Investor Research, Industrial, JLL.

While 2020 is unlikely to match the record 2019 volumes, “the concentration of ownership in the industrial sector will facilitate many spin-off packages that are brought to market, as regional and market-focused offerings are spun-out of massive transactions acquired over past two years,” says Kroner.

The impact of e-commerce

Competition for industrial assets is at an all-time high as warehouses and distribution facilities become critical hubs for growing e-commerce companies racing to deliver products to consumers.

Global demand for new industrial space is expected to exceed 3 billion square feet over the next decade, according to JLL Research.

“There have been secular shifts in the supply-chain due to the increasing prevalence of direct-to-consumer consumption, which is driving an entirely new demand-base for industrial space,” says Kroner. “There is robust investor interest in urban infill; cold storage and freezer space, multi-story warehouses, grocery delivery sites and many other subtypes.”

Expectations of faster delivery times are rising, especially among retailers' coveted young, urban demographic. Accordingly, investors are eyeing smaller distribution centers in the urban core. At the same time, investors are looking to fund new developments that serve the high-tech needs old warehouses can’t fill.

“Because investors are focused on newly delivered and urban infill assets, values are going up for both the newest product on the market and the oldest product on the market,” says Kroner.  

Redefining risk

As the real estate cycle extends into its tenth year, investors are becoming increasingly cautious and struggling to deploy the near-record amount of capital targeting real estate sitting in funds across the world.

The competitive environment is encouraging investors to favor sectors that are deemed more resilient to economic of geopolitical disruption, and Industrial is benefitting.

“More investors are likely to step outside of previously pursued risk profiles and expand definitions of ’core’ markets or assets in order to satisfy capital placement requirements,” says Kroner. “This is likely to shift activity toward an expanding number of industrial markets once considered lesser-tier in investment circles.”

“Increased allocations to the industrial sector coupled with the consolidation of the ownership landscape are driving values higher — deals that exceed $500 million will likely continue to surge as single property values increase.”

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