E-Commerce, Economic Recovery Are Transforming Industrial Market
Industrial space tenants form the core of any economy, according to NAI Global, and require adjusting to variable retail and housing markets, expanding and contracting according to the financial environment of a country’s import and export capacity.
NAI Global boasts an extensive and solid track record of partnering with institutional and private clients whose business lines range from manufacturing and distribution to 3PL, supply chain, and service companies. The company has signed on as a Premier sponsor of I.CON ’15: The Industrial Conference, and NAIOP was honored to talk with Jay Olshonsky, NAI Global president, about his view on industrial and how this booming industry segment is shaping up.
NAIOP: Why is industrial keeping a stronghold as the hottest property type and what’s driving the demand?
Olshonsky: A combination of factors has created the robust market for industrial. First, there is the ongoing U.S. economic recovery. Consumer spending drives our economy; steadily increasing employment and pockets of wage growth, combined with signs of improvement in the housing sector and the recent decline in oil prices, all bode well for greater consumer confidence and greater consumer spending. Consumer spending is an important driver of industrial demand. Further, the industrial sector has reaped great benefits from the explosion in e-commerce, which is driven by increased consumer spending as a growing population of online shoppers demand overnight or instant delivery. We’re seeing smaller and mid-sized industrial moving closer to thriving urban centers where this consumer demand is the greatest. While construction has increased, we see demand holding steady as the economy continues to improve driving a variety of industrial growth engines.
NAIOP: What must industrial real estate developers and partners do to keep competitive?
Olshonsky: Regardless of the demand in the market, it’s very important to provide product that is attractive to high quality tenants. Thanks in part to the e-commerce boom and changing retail logistics, facilities need to accommodate more sophisticated racking systems, provide higher ceilings, offer more loading capabilities and room for picking, packing and shipping, and that could also mean larger parking areas. In addition, it’s important that owners keep sustainability in mind as they improve – or build – facilities. Europe is far ahead of the United States in this respect. Warehouses have an opportunity to be at the forefront on solar energy, for instance, since their fundamental design makes for easy installation of solar panels on vast, flat roof surfaces. For service providers, it’s critical that they stay up to speed on the drivers of industrial demand and growth, and help owners and tenants anticipate how continued economic growth and the potential for a global recovery could impact their short- and long-term decisions.
NAIOP: What factor is most changing industrial?
Olshonsky: Clearly, e-commerce and the economic recovery driving consumption are already playing significant roles in transforming the industrial market. Signals are mixed regarding the potential for a manufacturing recovery in the United States, but the ingredients like lower energy prices as well as increasing consumer spending could be among the catalysts to sustain a recovery. The good news is we continue to see industrial strength in port cities in spite of weak economies in Asia and Europe. As those economies come online, industrial will again benefit from increased international trade activities. As for the Panama Canal expansion, it’s already having a meaningful impact on industrial markets in major port cities. Changes in infrastructure such as New York’s raising of the Bayonne Bridge to accommodate the larger cargo ships destined to their markets are indicative of the opportunity that will further bolster strength in industrial. But with this opportunity also comes increased competition among port cities on the East and West coasts.
NAIOP: Why is NAIOP’s I.CON sponsorship investment valuable to your company?
Olshonsky: As a full service firm with deep roots in industrial real estate, our NAIOP sponsorship is very valuable to us. NAI Global Member firms are leaders in their local markets and together make up the world’s single largest, most powerful global network of owner-operated commercial real estate firms. Our NAIOP relationship connects our leaders with other commercial real estate leaders. We are very excited to have a presence at NAIOP I.CON in June, and I look forward to seeing everyone at the event.
NAI Global has 375+ offices located throughout the Americas, Europe and Asia Pacific, with 6,700+ local market professionals, managing over 380 million square feet of property.
Meet NAI Global at I.CON ’15, June 10-11 in Long Beach, California. See the conference website for details on who attends, hot sessions, and project tours.
Kathryn Hamilton, CAE, is Vice President for Marketing and Communications at NAIOP Corporate.