Understanding the factors that influence the supply and demand of industrial real estate is key for a successful investment. By examining specific trends and indicators, you can make informed decisions and position yourself for long-term growth.
Here are some factors to consider when analyzing industrial real estate supply and demand.
The Industrial Real Estate Landscape
A variety of factors influences the landscape of industrial real estate. Some of the most important are economic trends, population shifts, and infrastructural developments.
Here’s what to think about:
- Economic trends: A booming economy usually drives up the demand for industrial real estate. Businesses are expanding their operations and need real estate to do it. On the other hand, downturns may result in oversupply and lower rental rates.
- Population shifts: Growing urban populations often spur the demand for industrial spaces in city outskirts, as businesses require logistics facilities close to consumers.
- Infrastructure developments: Good transport networks can increase the appeal of certain industrial locations, influencing supply and demand.
Supply Considerations
When assessing supply, it’s essential to evaluate local market conditions. Look at vacancy rates, new construction, and the pipeline of future developments.
- Vacancy rates: High vacancy rates indicate an oversupply, which could put downward pressure on rental prices. When deciding on a location, look for major markets with low vacancy rates. Additionally, assess the current rent prices for warehouse/distribution space. If there’s a lot of supply, but not a lot of demand, prices tend to go down.
- New construction: Assess the development pipeline and how much construction is underway. What percentage does this represent of the market’s inventory? A surge in new construction could lead to oversupply unless it's matched by demand.
- Future developments: Infrastructure improvements and planned industrial parks may increase future supply. Industrial parks are designated, planned, and zoned for industrial development. They’re typically a blend of production, transportation, and storage facilities located near each other.
Demand Drivers
In analyzing demand for industrial real estate, consider economic performance, industry growth, and the e-commerce boom.
- Economic performance: A strong economy, characterized by high employment rates and strong business confidence, can boost demand for industrial spaces.
- Industry growth: The expansion of specific industries (like manufacturing or logistics) often drives demand for industrial properties.
- E-commerce boom: The continued rise of e-commerce has significantly increased the need for warehouses and distribution centers.
Use Local & Global Market Insights to Think Ahead
Analyzing industrial real estate supply and demand is a balancing act. It's about recognizing the local market’s dynamics, understanding the broader economic landscape, and predicting future trends.
- Local market dynamics: Pay attention to local zoning laws, the competitive landscape, and tenant mix.
- Broader economic landscape: Understand how global trends, trade policies, and technological advancements might impact industrial real estate.
- Future trends: Stay updated on potential changes in consumer behavior, logistics needs, and industrial innovation.
Find a Trusted Industrial Real Estate Expert
The world of industrial real estate can be complex — even with a clear understanding of the supply and demand factors that influence it. As a land and commercial real estate brokerage, SVN Saunders Ralston Dantzler can help you navigate that world with confidence.
For more than 25 years, our expert team of advisors has helped clients in Florida and Georgia find the right industrial real estate investment to align with their business goals, and our counseling and advisory services help clients develop strategies to make that investment more profitable.
To learn more about how we can help you find the right industrial real estate investment, call SVN | Saunders Ralston Dantzler at 877.518.5263.
Disclaimer: This article is only intended for informational purposes. SVN | Saunders Ralston Dantzler does not guarantee the sufficiency of the content in or linked to from this article or that it complies with current law. The content within this article is not a substitute for legal advice or legal services. You should not rely on this information for any legal purpose without consulting a licensed lawyer.