SALES ACTIVITY IN THE INDUSTRIAL MARKET
Written by: Benjamin Johnson, SIOR
Ben Johnson is a member of the Industrial Services Group at Colliers | Columbus and specializes in industrial sales, leasing, land development and investments sales. He has a unique understanding of site selection, the development process, and financial analysis. He also acts as a consultant for his clients in numerous commercial real estate transactions including planning, investment, advisory, and development assignments. Keep reading to get Ben’s take on recent industrial activity and the future of investment sales.
How have you seen the COVID-19 pandemic affect industrial leasing demand?
It has certainly influenced the market, though it varies by industrial property sub-type and each occupier’s business or industry. While the speed of growth in e-commerce has been accelerated significantly and demand for modern e-commerce distribution buildings should remain strong, others have seen their business slow. Some manufacturers have seen slowdowns due to government mandates, supply chain disruptions, and reduced consumer demand for some products such as cars and other goods. On the flip side others have seen increases in demand for items such as PPE, grocery items, home office supplies and electronics, etc. While many companies have put long-term lease plans on hold, many others have been seeking temporary space for overflow storage or other immediate needs, and others still seem to be largely unaffected.
How have you seen the COVID-19 pandemic affect industrial sales activity?
While some owner-users have put their plans on hold until the situation resolves and/or government mandates affecting their business expire, others have moved forward to take advantage of the historically low interest rate environment. Demand remains high and available inventory remains low, so when well positioned and functional properties come available they are still selling quite quickly. Industrial investment sales continue to move forward based on the sea of liquidity and the expectation that demand for modern distribution buildings will remain strong. We also expect more companies to consider selling some company-owned real estate and leasing the property back from the investment buyer to free up cash on their balance sheet.
In the past two downturns, industrial sale prices per square foot dropped around 30%. Do you think prices per square foot will see the same drop post-coronavirus? Why or why not?
No, I don’t. Demand seems to remain relatively strong other than short-term concern of the unknown. With consumers increasingly ordering goods online for delivery, we expect demand to continue to be stable, other than for some warehouses that serve retail stores or other industries that have been severely affected. Of course, the major question mark that could change this outlook is how long the COVID-19 pandemic keeps people at home, keeps people out of work, and affects their income and therefore consumer demand.
The industrial market has historically seen a lot of investment from foreign buyers. Do you think COVID-19 will impact this moving forward?
No, I don’t. The U.S. remains a safe-haven for investors compared to many other parts of the world. Central Ohio should continue to fare well, though this geographic market does not see as much foreign investment as Chicago and larger cities on the coasts. However, in recent years, Central Ohio has seen increased foreign investment based on its geographic logistical advantages, the more attractive returns (compared to larger markets) for investors, the relatively business-friendly environment, the available and educated workforce and the lack of major natural disasters or other weather events causing delays.