Members of the CCIM Institute, Commercial Real Estate’s Global Standard for Professional Achievement, indicated strong investor interest in industrial properties, according to the organization’s 3Q15 Quarterly Market Trends report. Approximately 69 percent of CCIM members who participated in a July/August 2015 market intelligence survey reported a higher industrial deal flow year over year, with a closing rate of 94 percent on industrial transactions. CCIMs reported a 100 percent closing rate for industrial leases, with higher rents in 67 percent of closed industrial leases. CCIMs gave industrial property segment a 3.2 out of 5.0 investment value vs. price ratio, the highest rating of any of the major property segments. In terms of property segment investment conditions, industrial rated 3.7 out of 5.0, just below multifamily, which received a 4.0 rating.
The increase in industrial leasing and sales activity coincides with CCIM designee comments in Commercial Investment Real Estate’s September/October 2015 cover story, “Industrial Revs Up.” CCIM designees, considered local market experts in secondary and tertiary markets, were asked about the increase in industrial activity.
“I would characterize our industrial leasing market as hot,” said Brian Young, CCIM, SIOR, a managing broker at Cushman & Wakefield/Thalhimer in Greenville, S.C. “We have already seen over 4 million square feet announced in new deals in 2015, and there are several large users out in the market now that will sign this year.”
In the Dallas-Fort Worth area, flex space is in demand and harder to come by, particularly in communities near the airport, such as Grapevine, Coppell, and Southlake, Texas, according to Russ Webb, CCIM, a managing partner at Silver Oak Commercial Realty in Southlake. “There are a ton of smaller flex users, and there is just not enough inventory,” Webb said. “Finding single tenant or even multi-tenant buildings is very, very thin.”
Product is just as scarce for industrial buyers, especially the large institutional investors that are scouring smaller markets for better yield. “Every other week we have an institutional investor coming to town wanting to talk about investment opportunities,” said Joseph Orscheln, CCIM, vice president, industrial properties at CBRE in Kansas City, Mo. “Unfortunately, we just don’t have a lot to present to them. If there were, there would be great competition for those opportunities.”
A Broad-based Recovery
CCIMs gave strong investment ratings to all property types (see chart), indicating a recovery that has finally found its way to smaller markets. The great majority of CCIMS who participated in the survey work in markets with populations between 1 million and 5 million.
CCIMs rated their regional economic business climates 3.8 out of 5.0, and gave the national economic rate 3.4 out of 5.0. Both averages surpass last year’s third-quarter ratings of 3.7 for regional and 3.1 for national economic conditions.
In regards to other property sectors, the most CCIMs (66%) reported lower capitalization rates YOY on multifamily transactions. The highest closing rate reported was for retail transactions (98%) along with the most CCIMs reporting higher retail rents (76%). In the capital markets, more than a third of CCIMs reported meaningful improvement YOY in credit availability across all major property sectors.
For more information, download the complete 3Q 2015 Quarterly Market Trends Report