THE DEMAND FOR INDUSTRIAL REAL ESTATE
Written by: Harrison LaHaie
Harrison LaHaie is a student at The Ohio State University studying Economics and History. He is currently interning with Colliers | Columbus on the research team. Keep reading to get Harrison’s take on the industrial sector’s continued demand.
Demand for industrial real estate has been red-hot for months now. Across the country warehouses are being built and leased at an incredible rate. Prologis, the industrial REIT giant, has projected that as it stands now there is less than a year and a half of supply for logistics real estate left. Prior to 2021, this metric has never fallen under 32 months. Moreover, anything under 50
months is enough to generate rent growth. This demand is felt in Columbus as last quarter, Colliers calculated a vacancy rate of under 2%.
Fundamentals in the industrial market are quite strong. E-commerce has risen from 11% of total retail sales to 14% from pre-pandemic to present. This has driven demand for warehouses across the country to help online retailers meet their customers’ demands. Another potential tailwind for the industrial sector is the need many retailers will have for increased inventory space. With supply chains disrupted, retailers will likely have to keep a greater stock of inventory to better absorb supply shocks, creating demand for warehouses.
With the strength of the underlying fundamentals, it is unlikely that the industrial sector will slow down any time soon. The only factor that may potentially slow the market would be a recession in the rest of the economy, hurting consumers. Structural change in which people buy their goods online instead of in person combined with deglobalization due to geopolitical uncertainty leading to disrupted supply chains and more demand for on-hand inventory will keep the industrial sector and warehouses in high demand in the United States.