An increasing percentage of industrial occupiers are choosing to buy rather than rent their facilities, according to a CBRE study.
Property sales to industrial occupiers grew 32% last year to 2,504, resulting in a 5% increase in the average sale price to $152.42 per square foot, said CBRE. The third quarter saw the most sales at 682 and the highest price per square foot of about $160. According to the report, industrial sales fell to 623 during the fourth quarter. By comparison, there were 451 industrial sales during the first quarter of 2023, and the average sale price was around $136 per square foot.
Occupiers are choosing ownership over renting for several reasons, including long-term savings once the mortgage is paid off, tax deductions for mortgage interest, property taxes, certain operating expenses, and the ability to customize or renovate the property to meet unique needs. In addition, property value appreciation provides an attractive long-term investment return, and occupiers don’t have to worry about rent increases or lease terminations, said the report.
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Investors are also more willing to sell certain industrial assets, especially older buildings. CBRE said just over half of occupier acquisitions last year were for buildings constructed before 1980, while 861 were built between 1980 and 1999, and 389 were built between 2000 and 2019. All of the buildings that occupiers purchased in the 10 markets where they were most active were at least 25 years old, according to the report.
Chicago was the top market for occupier acquisitions in 2024, with 188 transactions and an average price per square foot of $93.88. The average year built for occupier-purchased buildings in Chicago was 1977.
Houston followed Chicago, which saw 143 occupier purchases at an average price per square foot of $113.79. Los Angeles ranked third with 123 transactions and an average price per square foot of $287.79, the highest of the top 10. Los Angeles also took the top spot for the oldest buildings sold, averaging 55 years.
The other top ten markets were Dallas-Fort Worth, Northern-Central New Jersey, California’s Inland Empire, Atlanta, Detroit, Phoenix, and Minneapolis.
Additional opportunities for occupiers to buy facilities will materialize over the next three years as nearly 21,300 industrial leases are scheduled to expire. More than 12,600 of those are in pre-2000 buildings. With supply expected to increase, occupier acquisitions will likely account for a greater share of industrial net absorption, said CBRE.
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Kristen Smithberg
Kristen Smithberg is a Colorado-based freelance writer who covers commercial real estate, insurance, benefits and retirement topics for BenefitsPRO and other industry publications.
