Industrial Insights - September 2022
While the Cat's Away, The Mice Will Play
Many institutional investors took summer break while market volatility settled. A popular strategy involves purchasing fully-leased properties with below-market rents and upcoming lease expirations, though higher borrowing costs have created more negative leverage positions.
National leasing figures show robust activity: 60% above pre-pandemic levels with "11.6% year-over-year rent growth." Despite Amazon's shift toward sales over leasing, the industrial leasing market remains competitive in major metropolitan areas with multiple bids on functional properties.
The prevailing market thesis assumes continued industrial rent growth and corresponding NOI increases, benefiting investors while tenants compete for desirable spaces.
Tenants and Users
First-generation (newly constructed) space leasing requires careful attention to tenant improvements, infrastructure, and construction oversight. Key considerations include:
- Building configuration options (potential subdivisions requiring walls, electrical, sprinkler work)
- Internet and fiber availability assessment
- Construction progress tracking through regular meetings
Success depends on coordinating landlord teams (architects, contractors, project managers) with tenant teams (leadership, IT, logistics partners). Current supply chain challenges include "lead times on HVAC units, electrical gear, dock elevators" and municipal permitting delays.
Timeline precision matters: threading the needle between tenant improvement allowances, construction standards, and lease expiration dates determines occupancy success.
Market Reports & Media
Regional market reports available for Southern California counties, national markets, and additional locations upon request. Two books and a podcast series address industrial real estate strategy and economic indicators affecting the sector.