LOS ANGELES—The industrial sector is booming with an abundance of capital in the market, supply levels in check and soaring tenant demand, according to Jim Carpenter, executive director at Cushman & Wakefield. Carpenter is moderating the Industrial Investment Outlook panel at the NAIOP I.CON event on June 10 and 11 in Long Beach. (NAIOP is a GlobeSt.com Thought Leader.) On the panel, he’ll be asking the speakers to weigh in on the current market conditions and alternative investment strategies. But, from where his is sitting, the market is looking good.
“There are no danger signs on the horizon,” Carpenter tells GlobeSt.com. “Due to any number of factors, industrial is the darling, if you will, of all the asset classes. It was the most favored property type by investors last year, this year and it may be true again next year. As a result of that, there is plenty of capital available to the sector. The debt and equity sides are still relatively manageable, the supply situation isn’t too far ahead and tenant demand is great, so there isn’t a lot to complain about. For right now, our business could not be any more robust.”
Of course, that isn’t to say that there are no concerns among investors. Although debt loans in the industrial space aren’t facing an overleveraging problems—as they are in other sectors—the ample capital does stir up some concern about supply issues. “We haven’t really seen that 85% LTV, high-octane money come into the industrial sector yet. In our space, people aren’t talking every day about concerns over excess leverage,” says Carpenter. “What they are talking about is the abundance of equity and the potential for additional supply, if you were to circle risk factors. At some point, supply is going to change significantly.”
Still, the current controlled supply and high demand has prompted some investors to move into secondary markets, but not tertiary markets. However, they are focusing on only the best quality products in those markets. “Function is critically important to the modern logistics user,” Carpenter explains. “Those investors that have gone into secondary markets have insisted on buying best-in-class properties. They haven’t gone into secondary assets. Warehouse labor is also in tight supply in many locations, and labor is a much greater cost of operating a warehouse than rent.”
When Carpenter moderates the investment panel—which includes Matt Brodnik, principal of acquisitions and capital markets at Exeter Property Group; Nicholas Anthony, EVP and CIO at Duke Realty; Stanley Alterman, executive managing director at USAA Real Estate Co.; Christopher Chang, VP at Goldman, Sachs & Co.—at I.CON next week, he’ll ask the speakers how they are navigating through the competitive environment, what their concerns are and where they are heading to find good yields. Join us in Long Beach to hear them weigh in on industrial investment.