The Real Deal New York

The unquestioned winners of 2017? Owners of industrial land

Industrial REITS saw returns of 24%, compared to single-digit returns in other sectors
December 28, 2017 09:30AM

The Blackstone Group’s Jonathan Gray

Prices for industrial land have outpaced all other sectors this year thanks to strong demand for warehouses and a dwindling supply of sites.

“This situation won’t go away any time soon, because the markets where distribution centers are most in demand—typically near or in densely populated city centers—have scant available land for industrial uses,” David Egan, head of global industrial research for CBRE, told the Wall Street Journal.

Pricing for large urban sites between 50 and 100 acres where warehouses can exceed 1 million square feet topped $100,000 per acre, up from roughly $50,000 a year earlier, according to CBRE.

Sites between five to 10 acres for smaller warehouses of 200,000 square feet increased to more than $250,000 per acre, up from about $200,000 a year earlier and roughly $150,000 in 2013, according to CBRE.

National vacancy rates are hovering at a cyclical low, and development pipelines are filling up. Green Street Advisors recently increased its supply growth forecast by 10 percent.

Returns for industrial real estate investment trusts were 24 percent between January and early December this year, according to Green Street. That exceeds the single-digit returns in other sectors like hotels, apartments and offices.

The Blackstone Group is buying a 22 million-square-foot industrial portfolio for $1.8 billion, as The Real Deal originally reported. [WSJ]Rich Bockmann