Thursday, March 17, 2011

Industrial Picking Up Steam In Numerous Markets

Multifamily investments have been the rock star of the commercial real estate investment pool for some time, showing solid returns and -- unless it is poorly managed -- stable or steady increases in value, in most markets.

The bottom line? People have got to live somewhere. And now, with housing starts at a dead stop and the economy still languishing, folks who have lost their homes are either renting houses, or in many cases to save a buck going back to an apartment. Which competes with younger people in the workforce getting their first apartment. Hence the pressure on multifamily properties that keeps rents, and values, up. How do we know? How often to you see signs that say "free heat" or "free TV" or "free washer/dryer" if you sign a lease? The giveaways are gone because owners and managers no longer need those enticements.

So today it is interesting to note that industrial properties in certain markets of the U.S. appear to be picking up in value. Plus, institutional investors appear to be gravitating more toward the industrial sector, which is raising quite a few eyebrows.

Along the eastern seaboard, a 613,000-square-foot distribution center in Baltimore sold for $26.4 million -- a 35 percent increase over the last time it traded in 2009.

We are starting to see this elsewhere as well, as long languishing industrial assets begin to see more tenant activity, which in turn, spurs activity from investors. Even last year, institutional observers noted that as liquidity returns and buyers start looking around for opportunities, the industrial sector would be poised to improve significantly. In Europe, investors there are excited because the industrial sector also has a rosy outlook.

All in all, industrial is picking up. In Ohio, there are improvements in both occupancy and sales values. Like any other real estate, it all comes down to location, location, location. Some areas are anemic where it comes to property values, but overall industrial continues to improve. I won't call it "the new multifamily," as some others are doing. But it bears watching!

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