Industrial investors are focusing their attention on core markets amid the economic crisis brought on by the coronavirus pandemic. A new survey from RCM/LightBox found that industrial investors are planning to focus on stable, high-growth markets, like Chicago, New York/New Jersey, the Inland Empire and Dallas. Investors expect the industrial market to be resilient through the pandemic, but uncertainty is encouraging a flight to safety.
"A number of factors are leading investors to focus on core markets, and core product during the pandemic," Tina Lichens, SVP of broker operations at LightBox, tells GlobeSt.com. "There is a level of safety and certainty associated with core, although safety appears to be somewhat relative these days. Nonetheless, investors are drawn to safety, even if its definition and parameters have been altered during the pandemic."
This is the reverse of a traditional investment trajectory for industrial product, but it is largely catalyzed by the pandemic. "Traditionally, users will expand from and contract to core markets," adds Lichens. "Core markets are typically associated with large population bases that support ecommerce growth." As online shopping has surged during the pandemic, investors are looking to align with assets that are tied to that type of growth trajectory."
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The industrial market has already been called the benefactor of this recession, and some capital sources are rushing to the asset class. However, investors are also responding to uncertainty about both the virus and the government's response to it. "While there are never any guarantees, as we've seen during 'closing then opening then closing again' economic cycles, today's savvy investors increasingly will act more conservatively and be drawn to certainty," says Lichens.
Ultimately, the pandemic has attracted more industrial investors. The public health crisis has disrupted the supply chain and created more opportunity. "It is the potential for supply chain disruption that is leading many users to increase their holdings, including leased facilities, in the US," says Lichens. "They look to the safety of having product in strategic locations on U.S. soil to avoid disruptions if product cannot be delivered from foreign countries. As a result, companies may increase the level of onshoring they do and they may take what is being called "insurance space" to protect their access to inventories. There are already reports of this increasing demand for industrial space in some U.S. markets."
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Kelsi Maree Borland
