Why the Industrial Market is Getting White Hot

by Jennifer LeClaire Globest.com
The industrial market is turning plenty of heads as the rebound continues and new spec development starts hitting key markets. But where are the true hot spots—and what makes them hot?

GlobeSt.com caught up with Bill Waxman, executive vice president of CBRE's Global Port Logistics Group, to get his thoughts on the state of the market, its evolution over the past year and the hotspots in part one of this three-part exclusive interview. Be sure to return to this afternoon's Miami edition for part two.

GlobeSt.com: What is the overall state of industrial, nationally, in terms of investment, development and leasing demand?

Waxman: The industrial capital markets continue to be on fire. Investors are no longer looking at industrial as a stepchild but, rather, as the white night.

Capitalization rates across the country are declining and, as a result, we’re seeing a huge amount of demand for a less-than-huge amount of supply. There’s great competition among global, national, and local investors for the same rare product.

At the same time, development demand is very healthy. In every major and secondary market, there continues to be new development—there’s currently more than 11 million square feet under development in New Jersey alone—and this is the right amount of development.

Markets won’t see an oversupply but will eventually reach equilibrium. This new development is directly in response to a healthy demand for leasing nationally and the continual activity on both fronts is bound to progress to productivity.

GlobeSt.com: How does that compare to a year ago?

Waxman: The overall state of the industrial market has continually improved since last year, though national asking rents are about the same. There hasn’t been a spike improvement but, rather, slow and steady improvement in leasing demand, development, and investment.

GlobeSt.com: What are the hot spots in industrial real estate—and why?

Waxman: There are a number of key hot spots in all regions across the country. Certainly, Los Angeles is a crucial market because of its ports, as well as the Inland Empire, which is cost competitive with Los Angeles and is ideal for transportation and distribution. As a result, the Inland Empire—along with Eastern Pennsylvania—remains the premier big-box industrial market in the US.

The Atlanta market has completely turned around and is doing very well, providing the southeast region with a key industrial asset. Louisville is also doing well, with help from the UPS hub Eastern Pennsylvania is on fire and can be considered the east coast equivalent to the Inlet Empire on the west coast.

Eastern Pennsylvania is cost competitive with New Jersey and still services the number one consumer zone in the nation. Additional hot regions include Miami—which can attribute its increasing activity to the rapid growth in Latin America—as well as Dallas and Chicago, both of which are major distribution hubs.
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