Long an unassuming asset class of the commercial real estate industry, over the past 15 years the warehouse/distribution market has moved front and center as the top performing sector of the real estate industry due to changes in retailing. The industrial sector now leads all five major asset classes in terms of investment yield, net absorption, and prospects for future performance. These real estate changes are a manifestation of lifestyle changes that have resulted in 374,000 jobs lost in department stores while 767,000 jobs have been created in transportation and warehousing over the past 15 years. Yet, brick-and-mortar retailing is far from dead. Just look at how Amazon is opening physical bookstores and acquiring grocery stores. Further, Walmart’s online sales grew 63% in the past 12 months in large part due to incentives offered for pickup at its stores. Meanwhile, the average store size is shrinking, requiring more warehouse space and putting pressure on delivery systems. All these trends are a boon to the warehouse/distribution market, especially in key distribution hubs across the nation – and likely will remain so for years to come.
The white paper concludes with opportunities and challenges for tenants and investors/developers of industrial space.
