Written by: John Dobrott, President – Industrial

Industrial real estate led the commercial real estate industry out of the great recession and continues to show unprecedented demand and record setting growth. Investor demand has followed to transition industrial real estate from the unglamorous investment made for portfolio balance into the darling of the industry.

What’s driving this demand? The user side is fairly obvious. E-Commerce has changed everything. The absorption from Amazon alone is staggering. E-Commerce pervades into nearly all industrial uses. Something e-commerce, whether direct or indirect, goes in or out of most warehouses these days. Even manufacturing, the old mainstay of industrial real estate, has reemerged in many markets. All this inures to the new found appeal of industrial real estate to institutional investors. Yet there’s more to it. Industrial real estate is a reliable performer with the new luster of income growth.

It always comes down to supply and demand. For all this surging demand, it’s been difficult to generate adequate supply, particularly in the coastal markets. In addition to a dwindling supply of well-located sites, more regulation, rising construction costs, new or increased fees and the NIMBYs have all thwarted supply. Hence the curve pushes up and the users have stepped up to pay industrial rent increases heretofore thought impossible.

In the old industry model, users didn’t have the latitude to step up to larger rents. Industrial businesses had always been operated on tight margins and rent was a significant part of overhead. Warehouses were static operations with few employees. Goods didn’t fly in and out at the furious pace they do now. Transportation wasn’t nearly as complicated or costly. I’m not saying rent isn’t insignificant nowadays. It is. However, as the cost to develop industrial real estate has gone up in good locations, users have not hesitated to pay up.

Another institutional appeal is that these properties are very difficult to replace. They are sophisticated with enormous tenant investment in conveyance systems. All the more likely to result in lease term renewals. The CapEx associated with lease renewal or turnover is much lower than any other commercial real estate segment. Nor are these properties old smokestack industrial. They are not environmental liabilities or neglected facilities. These are credit tenants, desirous of a clean business park setting with pride of tenancy or ownership.

Latest News

Southeast Gateway Fully Leased in Savannah

Southeast Gateway Fully Leased in Savannah

Conor Commercial Real Estate executed two full-building leases at Southeast Gateway in Savannah, Georgia. The two-building, 1.2 million-square-foot development is now fully leased. Swiss Madison, a manufacturer of bath products, leased the 184,080-square-foot Building...

Chicago’s Biggest Women-Owned Businesses

Chicago’s Biggest Women-Owned Businesses

The McShane Companies was named the second largest woman-owned business in Chicago by Crain’s Chicago Business. The firm is the only real estate developer to appear in the list's top 25 companies. Molly McShane serves as The McShane Companies majority owner, as well...

Importance of Relationships in Today’s Economy

Importance of Relationships in Today’s Economy

Written by Vicki Mutchler, Vice President of Capital Transactions A phrase we know well as real estate professionals is, “real estate is a cyclical industry.” The funny thing is that real estate professionals (most of whom are natural optimists) hope that this phrase...

Common Ground – Summer 2022

Common Ground – Summer 2022

Common Ground - Summer 2022 The latest commercial real estate news is here. Find updates on commercial real estate trends, Conor's projects and employees. View Interactive Version Download PDF

Lotus Project – Phase II in Chandler, AZ Sold

Lotus Project – Phase II in Chandler, AZ Sold

Conor Commercial Real Estate has sold two buildings at Lotus Project – Phase II to a Chicago-based institutional investor. The newly built industrial park in Chandler, Arizona, includes three state-of-the-art advanced manufacturing and light industrial buildings...

2022 Next Generation Award

2022 Next Generation Award

Development Manager Mike Fausone received Connect CRE's 2022 Next Generation Award. The Next Generation Award honors rising stars for their accomplishments in the commercial real estate industry. As Development Manager, Mike oversees the firm’s development projects in...