Four Common Themes Shaping the Industrial Real Estate Sector

I recently attended the Colliers’ Gaining the Edge National Industrial Conference in Scottsdale, an event that left me with a sense of optimism. The conference spanned two days of insightful discussions on key industry trends and complex economic issues affecting the industry and its businesses. 

Here are the four key takeaways from the conference: 

Industrial Landscape Evolution: The industrial sector remains robust but is undergoing a notable transformation. There is a shift toward smaller floorplate buildings in in-fill locations to accommodate distribution and last-mile logistics. Bigger properties are still being developed, but we are seeing the sizes of these come down.  

AI and Proptech Integration: Artificial Intelligence (AI) and Proptech are increasingly integrated into logistics and order fulfillment processes to reduce reliance on human labor given labor market challenges and employee turnover. This adoption offers cost-efficient, faster, and more accurate operations, mitigating labor market uncertainties. 

Challenges in Construction Costs and Labor: Construction costs and labor shortages persist, causing significant challenges in the development of new industrial buildings. These hurdles are driving demand and leading to increased rent growth, particularly for smaller industrial properties. 

Reshoring Dynamics: Across various industries, particularly automotive and electric vehicles, there is a noticeable shift toward on-shoring and re-shoring. This movement necessitates a more skilled labor force and advanced manufacturing capabilities. 

The shifts in CRE that we’ve been tracking in the Southeast for months seem to be a common theme across the country. What holds true is the need for robust underwriting, especially in today’s economic climate. Disciplined underwriting will enable investors to identify assets with the potential to generate attractive returns amid challenging market conditions. In addition, adaptability and innovation are key in navigating these dynamic industry changes.  

I would be interested in learning what you’re seeing in the current CRE environment. Send me a message so that we can connect.