CHICAGO—Most of the nation's real estate sectors have received good news lately, but demand in the industrial sector seems particularly robust. In fact, according to a report released last week by the Federal Reserve, “at 106.7% of its 2007 average, total industrial production in November was 5.2% above its year-earlier level.”

However, even though speculative construction has returned, even in secondary markets, it has not been enough to satisfy demand, according to Erik Foster, an Avison Young principal and the practice leader of the firm's national industrial capital markets team. Furthermore, investor demand continues to outpace supply of assets coming to market.  

According to Foster, among the key trends to look for in 2015 are:
 

• A 3% to 7% increase in prices for industrial assets as supply lags behind demand. Although developers have more than 100-million-square-feet of speculative construction underway in the nation's top 30 markets, there can be a 12 to 18 months between construction, leasing and potential investment activity. Tenants are still looking for more space and many markets are reaching historically low vacancy rates.

• Secondary markets, such as Indianapolis, Columbus, Miami and Charlotte will experience sustained demand. This trend will continue to create a strong leasing environment in these cities. And sales momentum in 2015 should also remain strong due to the secondary markets' more favorable pricing and a shortage of core product. In fact, rents and per-square-foot prices should push past the historical market highs.
• Foreign equity, especially from Canada, South Korea, Germany and the UK will continue at a brisk pace.  International investors believe the US market offers stability and growth potential. 
• More equity will continue to put demand side pressure on prices and keep overall cap rates at, or in some markets, beyond, current levels for the best product. This demand will continue to push up the prices on industrial assets in secondary markets as well.