The industrial real estate market is booming, and there are several reasons for this. In this blog post, we talk about what is the future of industrial real estate. If you are thinking about investing in industrial property, now is the time to do it!
The robust growth of the industry has been driven by a rising population and a strong economy. The market size of the Real Estate Sales & Brokerage industry in the US has grown 4.9% per year on average between 2017 and 2022.
Key Takeaways
- There’s a growing demand for industrial space. The market size of the Real Estate Sales & Brokerage industry in the US has grown 4.9% per year on average between 2017 and 2022.
- Industrial space has become more affordable than ever before.
- The industrial real estate sector is one of the most important sectors of commercial real estate because it offers so many opportunities for businesses looking for storage space or manufacturing facilities.
Table of Contents
What is industrial real estate?
Industrial real estate is the commercial property that companies use to run their business. It includes everything from office spaces to warehouses, and it’s a crucial component of the economy.
The industry is defined by its focus on large-scale commercial properties, and it differs from residential real estate in that it isn’t focused on providing housing or personal space for people. Instead, industrial real estate focuses on providing spaces—usually large ones—that can be used for business purposes by a variety of different companies.
Industrial real estate has traditionally been an expensive investment, but in recent years, prices have fallen dramatically due to increased competition in the market and other factors. This has made it easier for small businesses to enter the industry without having to spend millions of dollars upfront as they once would have had to do.
Types of industrial real estate
Industrial real estate is a broad category that includes everything from warehouses and office buildings to distribution centers and manufacturing facilities.
The type of industrial property you choose depends on your business’s needs, but no matter which type of industrial property you choose, it should be well-maintained, safe and secure, and in a location that’s accessible to the people who use it.
Here are some types of industrial real estate:
- Manufacturing
- Storage and distribution (warehouses)
- Flex space
Reason #1: Online Sales Will Continue to Grow
The future of industrial real estate is looking bright, and online sales will continue to be a big part of that. Online sales are growing rapidly, and they’ve been a major factor in the growth of the e-commerce sector. The growth in online sales has been so significant that it even led to a change in how GDP is calculated.
According to Forbes, E-Commerce sales were $870 billion in the US in 2021, a 14.2% increase over 2020 and a 50.5% increase over 2019. E-Commerce represented 13.2% of all retail sales in 2021 in the US.
So why does this matter? Well, industrial real estate is an important part of e-commerce because it provides space for distribution centers where products can be stored and shipped out when needed.
With more people doing their online shopping rather than at brick-and-mortar stores, there will be more demand for warehouse space across the country—especially if companies want to get their products into consumers’ hands fast enough that they don’t lose money on shipping costs alone!
Reason #2: The Growing Need to control their supply chain
industrial and logistics real estate plays an important role in the supply chain for many companies. In recent years, there has been an increasing demand for industrial and logistics properties that have the ability to control their supply chain. This is because companies are looking for ways to cut costs and improve efficiency in their supply chain.
As a result, industrial and logistics real estate that can provide this type of control will be in high demand. industrial and logistics properties that are able to provide this type of control will be able to attract more tenants and generate more revenue.
Reason #3: Inventory modernization is still in an early stage
Industrial real estate has been a hot topic for quite some time now, but there’s still more to be done before we can say that the industry is truly modernized. Inventory modernization is still in its infancy, but more and more companies are beginning to see the benefits of adopting certain technologies.
When it comes to inventory management, many companies find themselves using old-fashioned methods like spreadsheets and manual tracking. This can lead to errors in data and a lack of visibility into what’s happening with their assets. With the help of an automated system, though, companies can easily track every piece of inventory they have—and they’ll know exactly where it is at any given moment.
Reason #4: The Supply of Industrial Properties is NOT Growing Rapidly
In the past years, industrial real estate has been one of the hottest sectors in the commercial real estate industry. With a low supply and high demand, many markets have seen an explosion in rent prices and development activity that resulted in a shortage of available space.
But now that some of these trends have started to reverse—we are seeing declining vacancy rates and lower rent growth—it’s clear that the demand for industrial real estate will remain strong as long as there aren’t enough properties on the market to meet it.
Reason #5: Less Turnover
Industrial real estate is not just a means to an end. It’s an investment. And as any investor will tell you, the more turnover there is, the less valuable your property becomes.
That’s why industrial real estate has been so popular with investors lately: there’s less turnover than ever before. With more companies opting for long-term leases and fewer companies going out of business (at least in the US), there are fewer opportunities for new tenants to come in and take over the space. This means that if you’re planning on investing in industrial real estate, it’ll likely hold its value or even go up over time.
Reason #6: Focus on the South/Southwest
Look to the South and Southwest. These regions have been growing rapidly for years, and they’re still going strong. But there’s also a shortage of industrial space in these areas, so there’s lots of opportunity for investors.
What does this mean? It means that if you’re looking for a great deal in an area with good growth potential, look south!
Reason #7: Simple to Operate
1. Industrial requires little Maintenance
Industrial real estate is easy to operate and maintain, which makes it a good investment for the average investor. The buildings are often empty most of the time, so there’s minimal expense involved in keeping them maintained.
2. Minimal Landlord Responsibilities
One of the biggest advantages to industrial real estate is that landlords are often responsible for little more than property maintenance and insurance. Because there are no tenants on site, there are fewer responsibilities when it comes to upkeep and maintenance. This can be a huge relief for landlords who don’t want to deal with tenants’ complaints about broken toilets or malfunctioning air conditioning systems!
Reason #8: Technology and automation adoption
The future of industrial real estate is looking bright, and it has a lot to do with the fact that people are embracing technology and automation at an increasing rate. More companies are adopting automated solutions for their manufacturing processes, which means that they need less space than ever to produce their goods.
In addition to this, many companies are also turning to industrial robots for their warehouses and distribution centers, as well as for tasks like welding and painting. This has resulted in an increase in robotics technology being used in factories across the country.
Reason #9: The Growth of Blockchain Technology
Blockchain technology may not sound familiar to you, but if it does, that’s probably because you’ve heard about bitcoin. While blockchain is not only used in digital currency systems, it’s also an emerging technology that holds a lot of promise for the future of the industrial real estate.
Due to its decentralized nature, blockchain technology has the potential to disrupt many industries. The real estate industry is no exception—the distributed ledger can be used in a variety of ways that reduce costs and increase transparency for buyers and sellers.
Reason #10: Small industrial properties are in high demand
Small industrial properties have always been in high demand and will continue to be so. They are one of the most sought-after types of commercial real estate because they tend to be affordable and easy to develop. They also offer a greater variety of uses than other types of industrial property, making them attractive for different businesses.
Reason #11: Production from overseas will slowly return to the United States
With the rise in transportation costs, it no longer makes sense for companies to ship goods all the way from overseas. Instead, they’re starting to set up production facilities closer to their markets. For the U.S., this means that we’re beginning to see production come back home.
It’s not just that labor is cheaper here; it’s also that transportation costs are rising and it’s becoming more difficult to guarantee the quality of goods produced overseas. In addition, automation technologies have gotten so much better over the last few years that many companies can now produce goods with fewer workers than ever before. As a result, we’re likely to see even more production returning to the United States in the years to come.
What’s the Future Industrial Real Estate in California?
Many people know California as the Golden State, a land of opportunity where people flock to pursue their dreams. And it’s true – California has a lot to offer, from its beautiful weather to its diverse economy. The state is home to a variety of industries, including tech, agriculture, and entertainment.
As a result, the state’s industrial real estate market is expected to grow in the foreseeable future. While the Los Angeles area is expected to see the most growth, other areas of the state, such as the Bay Area and San Diego, are also expected to experience an uptick in activity. With continued population growth and an improving economy, California is poised for an exciting future in industrial real estate.
Need help with Industrial Real Estate?
The industrial real estate market is on the rise, and there are many reasons why this sector looks promising for the future. If you’re looking to invest in property or need more space for your business, contact me today. My team of experts will help you find the perfect industrial property to suit your needs and budget. Don’t wait – the future looks bright for industrial real estate!
The future of industrial real estate FAQs
How big is the industrial real estate market?
The total size of industrial real estate in the U.S. was estimated to be $16 trillion in 2018, according to Nareit data on the midpoint of its range estimate—$14–17 trillion.
Why is industrial real estate important?
The Industrial sector is important because it caters to businesses that need to store their products and materials for long periods of time. These products can be anything from furniture, to food, to tools.
The industrial market also serves as a hub for manufacturing facilities, which are often large-scale operations that require a lot of space.
The industrial real estate sector is one of the most important sectors of commercial real estate because it offers so many opportunities for businesses looking for storage space or manufacturing facilities.
Where is industrial property booming the most in the US?
The industrial real estate sector is booming in many places across the US. In fact, there are many cities where industrial properties are exceedingly difficult to find. This is because there are so many businesses looking for industrial space that their needs have outpaced supply.
Conclusion
The industrial real estate market is on the rise, and there are several reasons why this sector looks promising for the future. From e-commerce to technological advances, here are seven factors that will continue to drive growth in industrial real estate. If you’re considering investing in industrial property or expanding your business into this sector, don’t wait – contact me today for a free consultation to see how we can help get you started.
