CHICAGO—Most of the nation's real estate sectors have receivedgood news lately, but demand in the industrial sector seemsparticularly robust. In fact, according to a report released lastweek by the Federal Reserve, “at 106.7% of its2007 average, total industrial production in November was 5.2%above its year-earlier level.”

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

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

• A 3% to 7% increase in prices for industrial assets as supplylags behind demand. Although developers have more than100-million-square-feet of speculative construction underway in thenation's top 30 markets, there can be a 12 to 18 months betweenconstruction, leasing and potential investment activity. Tenantsare still looking for more space and many markets are reachinghistorically low vacancy rates.

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