Industrial property has seen a dramatic increase in demand over the past 10 years primarily as a result of the E-commerce industry’s growth. The vast majority of consumer products that once lined retail shelves now fill industrial warehouses, ready to be shipped directly to consumers’ homes. While much could be said about the effects on retail stores long-term, most people are forecasting that this E-commerce trend will continue because of the efficiencies it creates, both for consumers and companies delivering the purchased product. This model continues to drive demand for warehouse space as more and more products are stored in and shipped from warehouses. Supply chains are built around this model with incredibly large warehouses more remotely located shipping products to smaller “last mile” industrial buildings within close proximity to the end consumer and diverse consumer bases. Despite the outcomes of this election one way or the other, and barring any global turmoil or cultural shifts, most forecast this supply chain trend to remain, thus continuing the upward pressure on prices for industrial properties.
While the demand for space for general distribution of products in and out of industrial property is poised to remain strong, what about the demand for space for the manufacturing of goods? This is where there are a few more questions in the air. Would one administration promote more domestically made products over the other? Could America see a renaissance of “Made in America?” While there will be an interdependence of manufacturing products between nations for the foreseeable future, is making key strategic products within our borders a matter of national security and preservation long term? Many people, reflecting upon the effects of the Covid19 pandemic, realize that key components of our USA health care industry are too dependent upon foreign countries. Is it to our strategic advantage to bring the production of these key health related products back within our borders? Does this argument extend to other key strategic products outside the healthcare industry? If the answer is ‘yes,’ then we should see the demand for industrial manufacturing space increase as well.
Overall, the forecast for industrial space demand continues to point to this product type being a key strategic sector within the US. This reality should help the sector endure any uncertainty that comes by way of changes in governing administrations. This is also why we are continuing to see big institutional money pursue industrial property acquisitions across the United States. It is the sector that is most poised to endure and thrive through economic ups and downs.
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Christopher J. Destino, SIOR, a Principal at Lee & Associates, is an engaging, responsive professional who enjoys working closely with his clients and helping them succeed.
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