The role of industrial properties
Buying an industrial property have always been a cause of discussion for prospective owners, particularly regarding the property’s value versus the asking price. Many industrial warehouses look pretty much the same, with the main difference being the size and location.
However, other options are available to the occupants that form a large part of their decision-making process, apart from size and location. These options include high ceilings, which allow the tenants to load and unload large pieces of equipment. Also, easy accessibility allows tenants to move large vehicles such as tractor-trailer trucks, cherry-pickers, and forklifts.
The graph above represents the producer price index for mini-warehouse and self-storage units.
Impact of a rebounding economy
Industrial properties suffered a major setback during the 2008 financial crisis. The vacancy rate for industrial properties increased, and the need for new industrial buildings was close to zero. Industrial REITs are expected to have a positive run in the future, due to increasing manufacturing activity and expected growth in the economy. If this occurs, there should be more demand for industrial space, which encourages lower vacancy rates and can increase the rents.
Investors in industrial REITs had a positive view of the Federal Reserve’s decision to increase interest rates by 0.25%. Prologis Inc. (PLD), DCT Industrial Trust Inc. (DCT), and East Group Properties Inc. (EGP) all ended the day on December 16, 2015, with positive returns of 1.8%, 2.9%, and 1.5%, respectively.