172. Industrial Real Estate Masterclass feat. Brent Peterson | How To Find the Best Industrial Real Estate Investments
Aug 15, 2024
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Brent Peterson, VP at AREA, and Ben Fraser, CIO of Aspen Funds, dive deep into the world of industrial real estate. They discuss the impact of rising interest rates on construction and the growing demand fueled by e-commerce. The guests highlight shifts in manufacturing due to the CHIPS Act and reshoring trends, showcasing how these changes create unique investment opportunities. They also explore emerging markets and tenant preferences, emphasizing the resilience of the industrial sector despite economic challenges.
The industrial real estate sector is flourishing in the southern U.S. due to strategic locations and rising manufacturing demands.
E-commerce growth and reshoring trends create significant opportunities for investors in smaller, adaptable industrial properties despite interest rate challenges.
Deep dives
Growth in Southern Markets
The industrial real estate sector is experiencing significant growth in the southern United States, driven by strategic development and favorable geographic positioning. The region's ideal location offers excellent access to highway systems, which is crucial for distribution and manufacturing purposes. While larger developers often overlook mid-sized markets, opportunities abound for those willing to invest in areas like Wichita and Kansas City, which are strategically positioned for logistics and distribution. This growth is further fueled by a rising demand for manufacturing facilities, as companies seek to reshore operations closer to key markets.
Driving Forces Behind Industrial Real Estate
E-commerce has become a key driver in the growth of industrial real estate, significantly increasing the demand for distribution and manufacturing space. The shift towards online shopping has heightened customer expectations for rapid delivery, prompting companies to establish more distribution centers closer to populated areas. Additionally, reshoring initiatives, accelerated by the COVID-19 pandemic, are encouraging manufacturers to move operations back to the U.S., primarily to enhance supply chain efficiency and control over production. Such trends highlight the ongoing transformation of the industrial market, making it a hotbed for investment opportunities.
Current Market Challenges and Opportunities
Despite rising interest rates impacting financing costs, the industrial market continues to show resilience with strong demand for leasing and construction. While some larger spaces have remained vacant, a strong desire for products and strategic growth remains evident among companies aiming to expand their operations. Smaller properties, particularly between 100,000 to 300,000 square feet, have maintained low vacancy rates, illustrating continued interest from tenants seeking efficient and adaptable spaces. The current economic environment presents a unique opportunity for investors to enter the market by focusing on smaller, strategically located developments.
Long-term Outlook for Industrial Development
The long-term outlook for industrial real estate appears promising, driven by the ongoing demand for modern facilities and shifts in manufacturing practices. Developers who focus on smaller projects and adaptable designs are likely to fare well, particularly as larger products have seen slower absorption rates. The potential for rental growth, paired with attractive incentives from local governments, provides a favorable landscape for investors. As the market stabilizes and interest rates potentially decrease, a resurgence in development activity can be anticipated, making industrial real estate a compelling investment prospect.
This is not a commitment, just a way to give you exclusivity once we launch.
This episode is a masterclass on industrial real estate with Ben Fraser, CIO of Aspen Funds and Brent Peterson, Partner at NAI Heartland. We discuss how to find the best industrial real estate investments in 2024, and much more.
This podcast is sponsored by Aspen Funds which focuses on Private Credit, Industrial Real Estate, and Oil and Gas offerings for accredited investors: https://aspenfunds.us/