Institutional Buyers Getting Into Industrials
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NEW YORK CITY- More investors have begun to see industrial properties as safe bets and have even started buying up product in tertiary markets according to figures just released by Real Capital Analytics. The sales of significant industrials totaled $2.2 billion in February, an increase of 22% from the previous February, bringing the total for the year’s first two months up to$4.8 billion, up 26% from last year, the data provider found.
Most significant, perhaps, was that nearly $1 billion of this year’s volume occurred in tertiary markets, a 174% increase over the same two months last year. “Although still early in the year, the positive trend is noteworthy and it holds for both individual and portfolio transactions.”
Source: Real Capital Analytics
Also striking was the greater interest in industrial properties shown by institutional investors. In 2012, these buyers spent almost $5 billion on industrial transactions, a 68% increase over 2011. Furthermore, their acquisition cap rates were only 6.9%, compared to an overall average of 7.7%, an indication that these buyers were targeting the highest quality property. “Nearly 20% of their acquisitions were in the L.A Metro with non-core industrial markets such as Miami and Sacramento also topping the list.”
Other areas of the country have also begun to benefit from the interest shown by institutional buyers. In March, GlobeSt.com reported that the Sitex Group had started their latest investment vehicle, Sitex Fund VII, with financing from a major state pension fund and expect to spend about $300 million in their targeted markets, the Chicago and New York-New Jersey metro area, over the next two years.
The leading institutional industrial buyer in 2012 was DRA Advisors LLC, which launches investment vehicles with clients such as public and private pension funds, university endowments and foundations and acquired 104 properties worth over $670 million. Other big institutional players were the California Public Employees' Retirement System and TIAA-CREF, which collectively bought 43 properties worth about $551 million. CalPERS backed CenterPoint’s $83 million acquisition of a Barnes & Noble distribution center in New Jersey, the largest property sale in February.
“Greater access to financing from both banks and CMBS helped propel acquisitions from the private sector in 2012,” RCA found. “Non-listed REITs are included in the private category and accounted for $3.0 [billion] of the 2012 total, a 26% increase from 2011.”
But this strengthening of the industrial property market might not continue. Although the increase in activity is across the board, RCA also found that “the pipeline of deals currently reported in contract is low.”
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