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DONNA CLARK
Senior Managing Director , Kennedy Wilson Property Services
President , Sacramento Valley Chapter of NAIOP
What does the industrial real estate market look like , both now and over the past year ?
In speaking to our industrial team at Kennedy Wilson Property Services , a division of Kennedy-Wilson Properties , Ltd ., responses were consistent that overall , the industrial market remains very strong , with demand continuing to outgrow supply . This is particularly pertinent to the more obvious trends in continuing high demand for warehousing and third-party logistics space related to e-commerce . However , success in the e-commerce lease sphere has caused many to overlook steady and growing demand for industrial space amongst other industrial uses , such as light manufacturing and food processing / cold storage , which are crucial not to overlook , as well as smaller and midsized user-owner and flex / R & D market . … Fast-moving consumer goods ( FMCG ) remain a hot sector right now , driving the continued need for distribution facilities . During the pandemic , consumer habits dramatically shifted , which made a significant impact on e-commerce and specifically the FMCG industry with online shopping at an all-time high . This shift towards increased demand for warehouse / distribution space is expected to continue throughout 2022 .
What else is driving demand ?
The recent passing of the $ 1.75 trillion infrastructure bill is expected to boost the manufacturing industry , with more than 556,000 jobs supported annually . This change , coupled with $ 150 million allocated for affordable housing and funds for climate-related and other environmental provisions — such as electric vehicle infrastructure and scientific research and development — will create additional need for state-of-the-art manufacturing facilities .
What ’ s going on in the Bay Area industrial market ?
… We continue to see bidding wars for industrial assets across the Bay Area . As an example , we recently marketed an industrial portfolio of two properties and within two weeks , we received three offers , all over asking . Buyers have been searching and the buyers that are educated about the constrained supply understand the need to make fast and competitive offers . Oftentimes , buyers are reluctantly giving up purchasing because of limited supply and intense competition and instead resort to leasing . There is a bidding war happening out there for industrial assets … due to the reshoring of activities . And with the challenges of logistics and supply chain and price increase in raw materials , many businesses are realizing that it ’ s critically important to have better control over their warehousing , distribution and manufacturing processes at home than abroad . Businesses want to be close to their customer and vendor base .
TIM VI TRAN
President and Founder , The Ivy Group
President , NorCal CCIM
Are there any lingering effects from the pandemic ?
… Prior to the pandemic , there was already an imbalance of supply / demand . The pandemic accelerated the imbalance and has forced many businesses to reconsider their lease / buy strategies . … Going into 2022 and beyond , perhaps to 2025 , we believe the market for industrial assets will continue to appreciate due to the shortage of land , long entitlement cycles , price increase in raw materials , shortage of skilled labor and strong buyer / tenant demand . We also think many international buyers are willing to place their money in Bay Area industrial assets to diversify their portfolio .
February 2022 | comstocksmag . com 83