Predicting the Headlines of 2022
Should we start with the good news or the, well, not so good? On the good news side, the industrial market is pretty much where we left it in SIOR Report’s Q2 market update. Namely, the national market is so tight that B product is still gaining allure for prospective tenants, even those who a few years ago would have considered only A product for their needs.
Further, “CBRE researchers anticipate that another 300 million square feet of industrial space will be absorbed on the back of e-commerce alone,” the article continues. “However, due to the need to research and develop, produce, and store COVID-19 vaccines, the explosive growth of life sciences and cold storage have also thrived in the pandemic and are expected to continue.”
Clearly, industrial is a market enjoying robust interest from tenants and investors alike, a far cry from the current situation that exists in the office sector. “Overall U.S. office absorption remained firmly in the red in Q2 2021,” reports Colliers, placing it at negative 18.6 million square feet. The report does give a nod, although slight, to a little good news, stating that at least this is “markedly lower than the negative 46.1 million square feet seen in Q1 2021, which was the worst quarterly total on record.”
Let’s get back to the good news. “The industrial market remains strong as e-commerce continues to gain more and more share of the sales that would normally go to retail brick-and-mortar stores,” agrees Sim Doughtie, SIOR, president of King Industrial Realty, Inc./CORFAC International in Atlanta.
Of course, this is not to say the industrial market is without its own woes, as major, months-long disruptions in the supply chain—also noted in Q2—continue to plague the industry, both in terms of on-time deliveries to e-commerce clients as well as the building delays and price hikes caused by hang-ups in the delivery of construction goods. “If you ordered steel to build an industrial building on Oct. 1, you won’t get the steel to the site until July of 2022,” says Doughtie.
One possible solution, in motion as we speak, is more onshoring and nearshoring with a greater reliance on backyard countries such as Mexico. “China has had significant labor increases over the past 10 to 15 years,” says Dallas-based Conrad Madsen, SIOR. “When you factor in the logistics costs, port delays, and challenges with China, Mexico is now on the same playing field for manufacturers.”
Read the full article in the Winter 2021 issue of SIOR Report now!
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