X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.

DALLAS-The same factors that the spring investment report from Jones Lang LaSalle claims have driven down overall US commercial real estate investment nearly 70% from last year appear to be at play in the industrial sector. But in addition to the widespread repricing of risk throughout credit markets and general economic concerns affecting the market in general, the industrial sector’s solid fundamentals, ironically, may be playing an equal role in its declining investment volumes.

“The real issue with industrial product is that the markets are fundamentally in such good shape that everybody’s happy holding,” says Cary Krier, senior vice president in JLL’s industrial services group in Dallas. “That’s dried up all the liquidity. Even if you want to buy, it’s hard to find a seller. Everybody’s paying the rent and doing well.”

According to Krier, a major factor behind the strong fundamentals is the continued, and somewhat surprising, strength of the retail industry. Though he acknowledges there are some signs of tapering, he says retail is doing much better than many people realize and certainly much better than analysts predicted. “You go through these warehouses, and people are still ordering and hiring,” he remarks. “I don’t know if they’re just reluctant to lay off people or what. But nobody’s giving back space. We don’t have a lot of sublease space creating a shadow inventory.”

Manufacturers are also doing well, he adds, largely due to the decline in the dollar making US goods more competitive in terms of price both at home and abroad.

At the same time, Krier continues, few large new leases are being signed. While the absence of big leases is holding back absorption, he believes the moderate pace of new construction and deliveries keeps vacancy rates from rising significantly. “Dallas, the Inland Empire and Atlanta all have pockets where they have pretty good size spec buildings sitting empty, but in general there’s not a lot of new projects coming out of the ground. Basically, it’s just a slow grind that’s keeping everything in balance,” he says.

Despite the positive scenario, Krier tells GlobeSt.com he can’t help but assume there are problems on the horizon. As he puts it, “We’re still early, I think. This is going to be a tough year, but the situation just hasn’t hit home yet.” He expects it will hit home, however, creating a financial pinch for some owners. Once they feel the pinch, he says, they will start bringing product to market, accelerating the pace of investment. “Until there’s some pain on the part of sellers, they’re not going to do anything. But once they start losing tenants, there will be a change,” he ventures.

An ancillary issue resulting from the lack of activity, Krier points out, is the uncertainty it creates regarding value. “Nobody really knows what the prices should be,” he observes. “Given the lack of certainty and the tight credit market, many owners elect to do nothing rather than actively market their properties.”

Want to continue reading?
Become a Free ALM Digital Reader.

Once you are an ALM digital member, you’ll receive:

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 3 free articles* across the ALM subscription network every 30 days
  • Exclusive discounts on ALM events and publications

*May exclude premium content
Already have an account?

Dig Deeper

GlobeSt

Join GlobeSt

Don't miss crucial news and insights you need to make informed commercial real estate decisions. Join GlobeSt.com now!

  • Free unlimited access to GlobeSt.com's trusted and independent team of experts who provide commercial real estate owners, investors, developers, brokers and finance professionals with comprehensive coverage, analysis and best practices necessary to innovate and build business.
  • Exclusive discounts on ALM and GlobeSt events.
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com.

Already have an account? Sign In Now
Join GlobeSt

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.