Music City = Industrial City

IRVINE, CA—Home of the Grand Ole Opry and known for decades as the Music City, Nashville has also become one of the nation's fastest-growing tech hubs. At the moment it also represents the best bet for acquiring industrial properties, according to the latest US Industrial Market Outlook from Ten-X.

In general, the industrial sector benefits from a pair of tech-driven trends: e-commerce generating demand for distribution centers and the increasing use of warehouses as cloud computing facilities. The top five markets identified by Ten-X each claim a unique position to capitalize on growing demand for industrial, with factors ranging from strong employment growth to absorption rates that are expected to continue outpacing supply in the next few years.

Along with Nashville, Ten-X's top five markets in which investors should consider buying industrial properties include Los Angeles, Memphis, Atlanta and the Inland Empire. Nashville itself enjoys a surging economy, fueled by employment levels well above the national average and rapid population growth; L.A. for its part enjoys one of the nation's lowest industrial vacancy rates at around 3%. Ten-X Research predicts a strong absorption rate will push industrial vacancies below 4% by 2018, and owners can expect top-line income to increase by roughly 3.5% annually through 2020.

Each sector covered by Ten-X's market outlook reports is also home to a top five of markets in which owners should consider selling, and industrial is no exception.  Markets that depend heavily on the energy sector have suffered in the past couple of years, and four of Ten-X's top five”sell” markets are in Texas: Houston, Dallas, Fort Worth and San Antonio. The top five is rounded out by suburban Maryland, a region currently faced with low population growth and a floundering professional and business services industry.

“The industrial sector is benefitting from the same shifts that are afflicting its retail counterpart,” says Peter Muoio, chief economist with Ten-X. “As more and more people choose to stay home to do their shopping, companies need more space to house and distribute the products they sell online. While other economic factors are hurting energy-dependent and port-exposed markets, this change in consumer behavior appears built to last, and puts industrial owners in a favorable position for the years to come.”

Citing Real Capital Analytics data, Ten-X says overall deal volume for industrial assets fell to $12.5 billion during the second quarter, representing a 26% decline year over year. However, vacancies have fallen into the mid-8% percent range, and rents have ticked upward by about 2% Y-O-Y. Ten-X Research predicts that rents will increase by approximately 3% over the next two years and vacancies are expected to fall as low as the mid-7% range in that time frame.

That being said, Ten-X cautions that industrial will remain vulnerable to a cyclical downturn on the horizon. After reaching their lowest level since 1990 in 2018, vacancies are expected to creep back up to around 9% by 2020, and rents are projected to see a decline of about 1% per year beginning in 2019.

The industrial sector has become the hottest segment in commercial real estate. How will logistics companies keep up with the market forces of omnichannel commerce? When will new supply finally catch up with demand? Who's putting investment capital into industrial and what does the future hold? Join us at RealShare Industrial on November 16 and 17 for answers to these and other questions. Learn more.

IRVINE, CA—Home of the Grand Ole Opry and known for decades as the Music City, Nashville has also become one of the nation's fastest-growing tech hubs. At the moment it also represents the best bet for acquiring industrial properties, according to the latest US Industrial Market Outlook from Ten-X.

In general, the industrial sector benefits from a pair of tech-driven trends: e-commerce generating demand for distribution centers and the increasing use of warehouses as cloud computing facilities. The top five markets identified by Ten-X each claim a unique position to capitalize on growing demand for industrial, with factors ranging from strong employment growth to absorption rates that are expected to continue outpacing supply in the next few years.

Along with Nashville, Ten-X's top five markets in which investors should consider buying industrial properties include Los Angeles, Memphis, Atlanta and the Inland Empire. Nashville itself enjoys a surging economy, fueled by employment levels well above the national average and rapid population growth; L.A. for its part enjoys one of the nation's lowest industrial vacancy rates at around 3%. Ten-X Research predicts a strong absorption rate will push industrial vacancies below 4% by 2018, and owners can expect top-line income to increase by roughly 3.5% annually through 2020.

Each sector covered by Ten-X's market outlook reports is also home to a top five of markets in which owners should consider selling, and industrial is no exception.  Markets that depend heavily on the energy sector have suffered in the past couple of years, and four of Ten-X's top five”sell” markets are in Texas: Houston, Dallas, Fort Worth and San Antonio. The top five is rounded out by suburban Maryland, a region currently faced with low population growth and a floundering professional and business services industry.

“The industrial sector is benefitting from the same shifts that are afflicting its retail counterpart,” says Peter Muoio, chief economist with Ten-X. “As more and more people choose to stay home to do their shopping, companies need more space to house and distribute the products they sell online. While other economic factors are hurting energy-dependent and port-exposed markets, this change in consumer behavior appears built to last, and puts industrial owners in a favorable position for the years to come.”

Citing Real Capital Analytics data, Ten-X says overall deal volume for industrial assets fell to $12.5 billion during the second quarter, representing a 26% decline year over year. However, vacancies have fallen into the mid-8% percent range, and rents have ticked upward by about 2% Y-O-Y. Ten-X Research predicts that rents will increase by approximately 3% over the next two years and vacancies are expected to fall as low as the mid-7% range in that time frame.

That being said, Ten-X cautions that industrial will remain vulnerable to a cyclical downturn on the horizon. After reaching their lowest level since 1990 in 2018, vacancies are expected to creep back up to around 9% by 2020, and rents are projected to see a decline of about 1% per year beginning in 2019.

The industrial sector has become the hottest segment in commercial real estate. How will logistics companies keep up with the market forces of omnichannel commerce? When will new supply finally catch up with demand? Who's putting investment capital into industrial and what does the future hold? Join us at RealShare Industrial on November 16 and 17 for answers to these and other questions. Learn more.