After a few great years for the already-booming industrial real estate sector, forecasts show that there may be even more business incoming. According to multiple market outlooks for 2023, industrial activity is expected to increase, with the demand being led by 3PLs (third-party logistics). With high demand being combined with a continued low vacancy rate (4 percent nationwide) it is easy to see why rental rates for industrial properties continue to rise.
European Influence
As the price of energy climbs in Europe, manufacturers are turning their eyes to the US as a go-to option for reshoring their operations. As discussed in the Wall Street Journal: “Due to skyrocketing gas prices, companies in Europe that make steel, fertilizer and many other products are shifting operations to the U.S., as they are attracted by more stable energy prices and stronger government support.”
Some of the biggest moves are occurring in the steel industry, which has already seen significant growth in the US throughout the past few years. For example, Luxembourg-based steel producer ArcelorMittal, stated they’re cutting production in German factories, but are seeing strong returns from a new facility in Texas thanks to the established industry presence and more affordable costs in the state.
Reshoring
In addition to deeper interest from investors, many American-based companies are also looking to return their overseas operations to US shores as a way to mitigate supply chain issues. In response to these challenges of the past few years, there has been an increase of regional distribution centers in many markets. Companies have also continued to invest more into just-in-case inventory, keeping the demand for overflow storage strong.
How do we Capitalize?
For the industrial and logistics real estate sectors, these moves add up to a lot of potentially lucrative opportunities. As large manufacturers set up shop in the US, we will continue to see increased demand for regional distribution centers and secondary overflow facilities. It is key to be positioned well in a few different areas to take advantage of these opportunities:
- Real estate investment: Ability to locate the best deals in a market and having the capital to invest
- Operational Support: Having a team in place that is flexible and has the capacity to grow to support additional clients
- Systems: Having proven systems and solutions that can be implemented in a short time to meet customer demands.
Looking for industrial real estate solutions? Contact the team at NAI Harmon today!