The pandemic has had a negative impact on many sectors of the real estate industry. However, industrial space properties are booming.
According to a new report from PwC, industrial investment and development is expected to be the top performing commercial real estate asset through at least 2021.
What’s driving this growth is the surge in online shopping. According to a recent report from Insider Intelligence, US retail ecommerce sales are expected to reach $794.5 billion this year, up 32.4% year-over-year. The growth of e-commerce increased the demand for industrial real estate in the past decade, and the rapid rise in online shopping has further accelerated the demand. E-commerce disrupted the retail industry and changed the way people shop. Now, it is changing how commercial real estate space can be properly developed during a pandemic.
The increase in retail e-commerce sales is driving businesses to warehouses, fulfillment centers and other industrial properties and it is causing office spaces to be redesigned and repurposed for storage and fulfilling centers. And Insider Intelligence predicts e-commerce retail sales could reach over$ 1.2 trillion by 2025 and add 1 billion square feet of demand for warehouse space by 2025.
Another factor driving this growth is that supply chain issues related to the pandemic are causing warehouse owners to stockpile inventory to protect themselves against future disruptions. So, the demand for storage space is increasing and some analysts predict that this could lead to an increase in demand of 400 million square feet in the next few years.
Returns as measured by the National Council of Real Estate Investment Fiduciaries are forecast at a yearly average return of 6.9% for industrial properties through 2022. Multifamily is expected to return an average of 3.3%, office 0.9% and a 4% decline for retail.
So, if you are a real estate investor and industrial space wasn’t on your radar, maybe it’s time to consider it.
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