eCommerce Drives Record 2021 Industrial Sales

Robust e-commerce growth is fueling an unprecedented race for space in the industrial sector and pushing investment sales activity to record levels, said LightBox and SIOR.

Industrial sector vacancy rates remain below 4 percent in many markets and 2021 investment sales activity could exceed the $120 billion record set in 2019, the LightBox-SIOR Industrial Investor Sentiment Report said.

The report acknowledged the sector faces some notable headwinds from supply chain disruption, rising construction costs and labor issues but said investors remain bullish on the sector’s long-term outlook. “As e-commerce continues to transform our economy, investors are looking for every opportunity to gain entry or expand their positions in the industrial sector,” said Tina Lichens, Senior Vice President of Broker Operations with LightBox. “The industrial sector is attracting significant amounts of domestic and foreign capital and is well positioned to withstand supply chain disruption or other volatility that might occur.”

Well over 70 percent of survey respondents said they expect industrial sector investment will increase and 49 percent of those respondents expect a significant increase. Another 24 percent said investment will likely remain the same. Only 4 percent of respondents said they expect decreasing activity.

Industrial sales volume reached surpassed $50 billion by mid-year as the average property sales price rose nearly 25 percent year-over-year to $120 per square foot, the report said.

Other report findings include:

–E-commerce will continue to drive industrial space usage. E-commerce sales grew by 40 percent over the past year and could reach $1.1 billion by 2025.

–Rents will likely rise between 5 percent and 7 percent next year. Nearly 60 percent of respondents said they expect rental rate increases exceeding 5 percent. Occupier demand, led by retailers and logistics providers, could push rents higher; rates could reach double digits in many markets. Asset pricing could increase the same or more. Among the top markets for year-over-year rent growth in 2021 are Northern New Jersey (33.3 percent), Inland Empire (28.3 percent), Philadelphia (25.9 percent) and Nashville (20.3 percent).

–Industrial construction continues at a rapid pace, with 151.5 million square feet completed in first-half 2021. The development pipeline totals 410 million square feet, with 60 percent of it pre-leased. The top markets for industrial construction include Dallas Fort-Worth, Atlanta and Chicago.