CALABASAS, CA—The industrial sector's metrics provide a solid basis for the interest investors have been showing in the sector. Marcus & Millichap says that sales activity for industrial is approaching 2007 levels, and the sector ispoised to climb back toward record pricing.

“For all properties andmarkets, transactions rose in the first half of 2015, exceedingthe number of deals in the first half last year by a wide margin,” according to MMI's Summer 2015 Industrial Outlook report. “The combination of additional sales and higher pricespushed dollar volume in the first half above pre-recession levels. Capital flows into the sector will intensify in the months ahead.” Investors surveyed by MMI anticipate an appreciation rate of 4.4% for industrial properties in the coming months.

As competition for assets has intensified over the past year, cap rates have tightened, and MMI sees this trend as likely to continue. As of midyear, the average caprates in primary markets stabilized in the 7% range, with best-in-class assets trading at caps below 5%.

MMI also sees investors going into secondary and tertiary markets in pursuit of yield. “As more capital pursues assets outside of the primary metros, yields should further compress in 2015, barring an unanticipatedincrease in interest rates,” according to the report.

The promise of bigger yields isn't the only factor sending investors outside the primary markets. While small and mid-sized markets often hang fire as demand for bulk industrial space recovers first, the new realities of e-commerce are benefiting properties outside the core. The Web's share of total retail sales has nearly doubled to 11% over the past decade.

“Internet businesses and retailers are a segment that will reshape the industrial sector in the coming year as businesses compete on speed of delivery, forcing retailers to find warehouse locations proximate to major population centers,” according to MMI. Also boosting demand for space is escalation in sales of houses and cars. Demand for space has also grown as auto and housing sales have recovered from their recessionary troughs.

Taken together, MMI says, “these trends will boost local industrial demand, drive investor activity and attract capital. The bull market has begun rippling beyond major port hubs and distribution markets to encompass a broader swath of metros.”

Not surprisingly, this bull market has also spurred development in a sector where it very nearly ground to a halt in the trough. “As the economy fell into recession, construction plans halted rapidly, and they were slow to find traction when the economic recovery began,” according to MMI. Yearly completions from 2010 through 2014 averaged just 35% of the average annual level recorded from 2001 to 2009.”

That's al set to change; MMI notes that industrial completions will ramp up to 145 million square feet this year, for the highest annual total in six years. As demand for industrial space began to accelerate in 2011, the US vacancy rate tightened accordingly, reaching 6.9% in this year's second quarter, the lowest Q2 reading since 2000. By year's end, MMI predicts, “growing demand will offset completions and reduce the nationwide vacancy rate to 6.5 percent, a 15-year low.”