A broad-based recovery in the nation’s industrial market is under way. Vacancy peaked a year ago, at 13%, and has since dropped to 12.5%, based on preliminary first-quarter estimates. Effective rents have stabilized, and the dollar volume of sales is up 23% so far in 2011 over the same period last year. This increase comes on the heals of volume more than doubling, thanks to a surge in sales of large institutional properties in 2010 from extreme lows in 2009. The average price per square foot for industrial assets has bottomed, with top-tier assets in primary markets registering the only gains over the past year.
Positive signs are clear when it comes to the economic drivers of the industrial sector, particularly growing U.S. exports, which is helping the manufacturing sector and normalizing global trade. Within the industrial property market, key leading indicators are also encouraging. Occupied space in the past two quarters has grown at a healthy annualized pace of 0.9%, and that rate appears poised to nearly double over the next two years, assuming that the economy continues to expand at a moderate pace. Construction activity is virtually nonexistent: Space currently under way will expand the existing base by just 0.1% when completed. The industrial vacancy rate will drop between 9% and 9.5% by 2013. As it does, significant rent growth will take place once again, particularly in key metros.
The obsolescence of older properties, excess construction prior to the downturn and an uneven economic recovery in various metros has further complicated the recovery. These forces make investing in the sector more challenging.
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Hessam Nadji
Hessam Nadji is president and chief executive officer of Marcus & Millichap, a leading commercial real estate firm specializing in investment sales, financing, research and advisory services. Founded in 1971, Marcus & Millichap has grown to more than 1,700 investment sales and financing professionals with offices throughout the United States and Canada. In 2016, the firm completed 8,995 transactions with a sales volume of over $42 billion. Mr. Nadji joined Marcus & Millichap in 1996 as vice president of research and advisory services and positioned the firm as a leading provider of market trends, analyses and expertise. Over the years, his role expanded to include marketing and strategy, enabling him to play a key role in establishing and growing Marcus & Millichap’s national brand. In 2010, Mr. Nadji assumed the leadership role for all of the firm’s national specialty brokerage divisions, which grew rapidly under his supervision. Marcus & Millichap’s specialty divisions function as client service teams of specialists with in-depth expertise in 12 real estate segments and achieved sales of $21.5 billion in 2015. Mr. Nadji also played a leading role in the preparation and execution of the firm’s IPO in 2013 as Marcus & Millichap’s chief strategy officer. He was named president and CEO in April 2016. Mr. Nadji is frequently sourced on behalf of the firm by national business media outlets, including The Wall Street Journal, Investor’s Business Daily, Real Estate Forum, CNBC, Fox Business TV, Bloomberg TV, and numerous commercial real estate publications. Prior to joining Marcus & Millichap, Mr. Nadji was senior vice president at Grubb & Ellis, where he began his career in 1986. He received a Bachelor of Science degree in information management and computer science from City University in Seattle. Mr. Nadji is a member of the National Multi Housing Council executive committee, the Urban Land Institute, the International Council of Shopping Centers and NAIOP.
