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Industrial Sector Set For Growth

Commercial real estate has seen a slow down during 2020, with vacancy rates on the higher side; particularly for office and retail space. This is something the National Association of Realtors’ (NAR) pointed to in their Commercial Real Estate Trends & Outlook report issued in February.

“Respondents reported that vacancy rates were still trending downwards. Among respondents, the average commercial vacancy rate across commercial types (multi-family, industrial, retail, and hotel) was 7.3% in 2019 Q4. The lowest rental vacancy rates were in multi-family, at 4%, followed by industrial, at 5%. The highest vacancy rates were in office, at 10%, followed by retail, at 9%.”

There is one sector, out of those highlighted in the NAR report that is set for a comeback. Demand and pricing could see the industrial sector thrive in the year ahead. What are the main factors driving this?

For the answer we turn to the September-October issue of Realtor magazine. In the magazine’s commercial outlook they address this topic, noting the following factors:

  1. Cold storage needs are rising: Driven by direct-to-consumer food delivery.
  2. Technology developments are shaping industrial spaces: Larger and taller distribution facilities are needed to accommodate equipment, like robotic picking machines.
  3. Distribution speed is blurring the lines between storage and retail: Lead by large retailers like Amazon and Walmart, who are combining warehouse and storefront.
  4. Artificial Intelligence and machine learning are driving efficiencies: Automation technology and a more domestic supply chain will increase demand for warehouse space.

Commercial spaces that can adapt to changing needs will be in high demand as we move in to 2021, and we’ll continue to watch for new trends as this is a market that is always moving.

Photo credit: CUTTERSNAP on Unsplash.