Invest Like a Billionaire Podcast: Finding Opportunities in Industrial Commercial Real Estate ft. Brent Peterson

AREA Real Estate Advisors’ vice president and director of the Industrial division, Brent Peterson, recently joined Bob Fraser and Ben Fraser of Aspen Funds on their podcast Invest like a Billionaire. This highly informative episode highlights commercial industrial opportunities and where to find them.

Some key highlights from the episode are:

– Vacancy rates across all real estate sectors are still low, however within the industrial sector the overall vacancy rate across the United States is below 5%. There are some markets that are seeing vacancy rates as low as 0.2%. With these low vacancy rates, we have evidence showing new deliveries and new construction showing that these properties are truly functioning operations.

– Industrial has been in a bull market for the past decade due to e-commerce. The growth spike in e-commerce was accelerated due to the COVID-19 pandemic, however we are still continuing to see growth. While the need continues to increase, e-commerce still may be growing at a slower rate as it has taken over more market share.

– There are three major categories of industrial real estate: distribution centers (think 500,000 SF Amazon warehouse), manufacturing facilities (think 300,000 SF – 500,000 SF Allstate facility), and flex space. Distribution centers are the wrap it in, wrap it out type spaces that try to get as much product through as they can. These can be typically found near intermodal hubs. Manufacturing facilities typically have heavier power, more lighting, more car parks in addition to the semi truck traffic that is coming in and out. Flex space can be single or multi-tenant, typically with 50% or more of office space similar to an HVAC contractor, car shop, etc.

– The market is experiencing some serious supply chain troubles due to a couple of things. First, the lag time in the length it takes to get the huge containers from other parts of the world to the United States. We have huge ships with thousands of containers on them showing up to the sea ports, but not enough people to them off of those ships and on to the trains quickly enough.  The other issue is that the demand for goods is much higher, as we are spending more money here in the United States. Because of this, companies who were used to having ‘just in time’ inventory, are now being forced to store extra inventory and pay a little more to keep them on hand so they will be able to deliver the goods.

– The trend of globalization is turning into a trend of localization. We have spent the last 30 years manufacturing overseas as labor is cheaper, cost if living is lower, but over the next several years we will see a shift as over half of the population will be retired. Like China, the US could see this at some point, as population seems to have hit its peak and there won’t be enough workers for the amount of work to be done. This in turn, will push us to focus on quality of construction and quality of goods. This will cause companies to pay a premium for the quality, but they will be getting the best product at the best price.

– While the surge for industrial space is still in demand, at some point we will over build and we will not have a need for all of this space.

To listen to the full podcast, click here.

Disclaimer: the statistics since the recording of this podcast may have changed.