From the opening keynote speech from JLL chief economist Ryan Severino, to the industrial spotlight from Matt Tucker, partner and co-chief investment officer at Bridge Investment Group, people were not holding back enthusiasm for industrial assets at the Net Lease conference. The word darling was used more than once, and investors on every panel said that they were increasing exposure to the asset class.

Severino admitted that he didn’t call industrial the darling of net lease lightly, but he added that the industry is looking at the asset class in a fundamentally different way following the pandemic. It has a larger role to play not only as a CRE investment, but in the asset’s role in the supply chain and as a driver of economic activity. Industrial assets now play an outsized role in the overall real estate market.

Bridge Industrial is planning to deploy $500 million in capital buy the end of the year, but Tucker said that the pandemic didn’t change the fundamentals of the asset class. It has been the best performing CRE asset for years, outperforming every other sector. While the pandemic wasn’t the catalyst, it did augment already robust growth. Due to the preference for online shopping, the market is poised for even more growth. According to Tucker, ecommerce required three-times the real estate space than brick-and-mortar retail.

As an active investor in the sector, he is seeing cap rate compression into the mid-3% range even in second tier market, and that pricing is supported by strong rent growth across the US. This combination allows for a different underwriting approach than a standard net lease deal, which doesn’t typically account for rent growth outside of standard step-up increases. On these industrial deals, Bridge is underwriting deals with rent growth and real estate upside appreciation.

At the same conference, experts on the net lease REIT panel and on the investment panel also discussed the strength of the industrial market, expressing bullishness on the asset class in the near and long term.