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Tue, Apr 23
A Compendium of Property & Capital News
Tue
Apr 23
A Compendium of Property & Capital News

Tenant Preference For High-Quality Industrial Space Continues as Absorption Stays Positive

April 17, 2019 - By Brendan Carroll - Perry Research
Industrial Returns Chart, courtesy of Perry Research

​BOSTON–In the latest “Steel’ by Perry Industrial report, Greater Boston industrial real estate experienced positive absorption of 225,000 SF for the first quarter ended March 31, 2019. An increase of vacancy by 0.1 percent to 7.6 percent reflected an inventory expansion of manufacturing space, as built-to-suit facilities were completed for Maxon Precision Motors and Pfizer. As a tenant preference for high-quality space continues amid a heightened set of competing uses for choice developable locations, tenants across much of the region are experiencing higher rent levels.

These increasing rents, along with a rapidly rising average level of credit of many of the groups with the larger requirements, is, in turn, creating a market for industrial space with notably lower return thresholds than those common among traditional market participants. While a new wave of speculative warehouse construction may be underway within two quarters, aggressively high expectations on the part of developers may spur optimistic rent increases for existing facilities.

An early set of forward-thinking investors are now enjoying large returns from recent investments in premium-quality, well-located industrial assets. New pricing psychology, driven by an aggressive tenant base, and a traditionally localized roster of owners is now being joined by a new set of investment groups. Here we take a look at some of the notable returns being achieved this decade with 2010s buys.

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