Are Global Investors Looking to Add Industrial Real Estate to their Portfolios?
According to the 2018 Global Real Estate Outlook compiled by PwC and ULI, investors all around the world are adding industrial assets to their portfolios. Why is that and is it a good decision considering the global volatility brewing?
Why global investors Are Interested in Industrial Real Estate
Multifamily, office, retail, they are all facing some challenges right now. Prices in many primary cities for housing are reaching pre-recession levels. Office is seeing a complete redesign and overhaul. And retail, well retail is perhaps seeing the biggest changes of them all.
What has proven to be true for several years now is that industrial assets are seeing their best consistent performance ever. That’s because e-commerce and retail in general all rely on deep and expansive supply chains that include a variety of industrial assets.
Secondary cities are proving to be darlings of industrial around the world from Copenhagen to Raleigh. Especially now that interest rates are on the rise amid fears of a new recession and out of control inflation, where assets are located will increasingly become a factor if economic trends start to falter.
Move to Space-as-a-Service Model
Software, even internet security has long adopted a service model where services can be offered a la carte. You may not need to hire an entire IT department, just someone to manage your company’s networks, for example.
Commercial real estate is experiencing the same type of change when it comes to industrial assets. More properties are coming online literally to fill the gaps in supply chains and last mile delivery zones turning commercial and industrial space into a service itself – particularly in a climate of single digit vacancies and high absorption rates in industrial.
Growing Economy in the EU
The U.S. weirdly is in a trading war with all of its EU and North American trading partners. So far, it hasn’t knocked the EU’s economy off of its stride. With much of the trade between the U.S. and the EU tied up in this war, new links are being built in supply chains throughout Europe to overcome any distribution channel obstacles created by U.S. tariffs.
U.S. Tax Cuts to Favor the Real Estate Sector
In the U.S. we’re nearing a 10 year expansion post recession, which traditionally means we’re less than a year away from a recession. Despite those worries, foreign investment in the U.S. real estate market has not let up. To the contrary, it has sped up in response to the Trump tax cut which largely favors commercial real estate. Many are banking on the reduction in corporate tax rates and the easing of rules governing offshoring profits to help withstand any economic downturn.