Every real estate market has been burning hot over the last couple of years, and industrial real estate hasn’t missed out on a moment of this. From the skyrocketing prices to the incredible amount of success many businesses have seen during the pandemic, it’s no surprise that many companies are looking to expand.
So why is industrial real estate so hot? These are the top reasons this asset is on so many minds and why it’s still looking up.
E-Commerce Sales Rose 220% in Six Years
E-commerce has always been big, but the numbers skyrocketed over the pandemic and the years leading to it. This has been a massive turn, with Amazon growing and every online retailer. Growth in sales means more need for space for the selling companies and more demand for space for shipping companies.
This rise is expected to continue despite many public pushes for people to stop using companies like Amazon: this massive company scored the highest-grossing year so far in 2021 and is expected to break further records in 2022.
Supply Changes Made Manufacturing Move to the USA
Manufacturing was something that had existed mostly outside of the country where it was cheaper: but in 2020, the pandemic halted a lot of manufacturing companies and caused disruptions in the chain that many companies couldn’t afford to deal with. This caused all building construction types to slow down to a halt.
Many companies moved to manufacture goods in the states instead, so there were fewer manufacturing problems, which has set a premium on industrial real estate since any space can be a space to make or sell your product.
Manufacturing Supply Challenges Mean Fewer New Properties
Unfortunately, that manufacturing supply chain issue stretched further than anyone could have predicted, and one of the main areas it affected was in building supplies. This lack of building materials, from historic steel windows, to even concrete, means there was a slow down in the warehouses and other industrial buildings that were needed when they were at their peak need. This caused these properties to hit all-time highs in value, and they haven’t come down yet.
The industrial real estate market is still a sellers’ market because of this, and many expect this to continue through 2023 and possibly further as long as the market is willing. This means that a property you buy now can gain up to 10% of its value within one year- which was unprecedented before the pandemic.
Fewer Properties Are Hitting the Market in 2022
Fewer companies are folding and selling their properties. Although many are trying to push that there’s a worker shortage in 2022: companies are hitting all-time profit highs during the last remains of the pandemic.
Fewer properties feed into the scarcity that was already seen from a lack of manufacturing goods and the high demand for new and established companies needing more space. Unfortunately, if you’re looking to buy land now, you’ll have to be incredibly careful and race against other bidders to ensure it has adequate floor drainage, lighting, and everything else you want: before eighty other birds fly in.
Warehouse Space is Needed Above All Else
Steel buildings are king right now because they’re quick to build and can have a lot of value despite that. Warehouse space is severely needed for more space to construct and manufacture goods. Amazon grew to have 110 fulfillment centers in the USA, and 185 globally, which is an unprecedented amount of industrial real estate power that’s hard to replicate.
Warehouse space is at such an incredible high that many companies are hoarding unused space and willingly driving the price up to try to boost more value. Unfortunately, it’s hard to tell when this bubble may begin to burst, or if it will at all: so the only warehouses available are incredibly expensive.
Logistics and Fulfillment Centers are a Close Second
Along with construction and warehouse space: there’s been a huge uptick in the need for fulfillment and logistics centers. Call centers have gone down in numbers because of the number of people who now work from home. Still, logistics and fulfillment are extremely valuable because they allow a company to finish the process of getting something ready to ship out. Although not as many companies are going to turn to ship their own items through a privately owned service the way Amazon does, there’s still a chance that it can grow and change and that many more companies will be moving to make changes that will decrease the time between the company and the customer.
There’s Chaos in Every Area of Real Estate
From the wild housing market to the incredible industrial real estate market, there’s been no pause in how fantastic housing markets have been getting. If you want in on this before it’s too late, now’s the best time to have industrial property as an asset.
Brian Jeffries is the content director for the Innovative Building Materials blog and a content writer for the building materials industry. He is focused on helping fellow homeowners, contractors, and architects discover materials and methods of construction that save money, improve energy efficiency, and increase property value.