Cushman & Wakefield, the world’s largest privately-held commercial real estate services firm, today issued its mid-year 2013 edition of the U.S. Industrial Investor Outlook and Trends. The report’s analysis leverages our Valuation & Advisory Industrial Practice Group’s expertise in collaboration with multiple C&W disciplines including Industrial Capital Markets, Industrial Operations and Research.
Investors indicate that the U.S. industrial market continues to fare better than the European, Asian and Canadian markets. Sales activity in the U.S. is expected to remain moderately healthy through the remainder of 2013 and well into 2014, with more significant sales activity and speculative development anticipated as inventory dwindles. Rent levels continue to justify new construction in most major markets, and the outlook calls for a continued historically low interest rate environment, despite the recent increases.
Investors identify several key U.S. markets for potential acquisition, which are expected to command premium pricing for Class A product. Frontrunner Southern California is still experiencing some of the most aggressive pricing, as overall cap rates have now compressed to the low-5 %range - in some cases lower if the contract rent is below market - with the overall vacancy rate in Greater Los Angeles down to 4.4% percent.
Recently, due to the lack of product in key markets, investors are now pricing “Portfolio Acquisitions” at a premium, from 5 to 10 basis points in some cases, as long as the assets are comparatively homogeneous, effectively fully occupied, offer up-side rent growth and located in the major industrial markets.
Secondary markets such as Phoenix and Las Vegas are also beginning to appear on investors’ radar screens with rent increases expected in the near term. Midwest markets are also seeing renewed interest due to the resurgence of the automotive industry, particularly Indianapolis.
Cushman & Wakefield’s Valuation & Advisory (V&A) group is one of the largest and most well-respected real estate valuation practices in the industry. For over 30 years, Cushman & Wakefield has been the trusted valuation advisor to corporations, institutions and investors around the globe. Well resourced to advise our clients on important equity and debt decisions, we are widely recognized for providing the most sophisticated advice involving complex real estate on a global scale.