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You are here: Home / Archives for Industrial Real Estate

June 17, 2019 by Peter Maclennan Leave a Comment

Commercial Real Estate Market Trends & Forecast

UCLA real estate experts recently published an analysis of the commercial real estate industry as part of the monthly UCLA Economic Letter, in which senior economist David Shulman dishes out “the good, the bad, and the ugly.”

While the commercial sector sees ups and downs just like the residential sector, commercial construction spending has grown steadily–and substantially–since 2010. However, spending has recently plateaued around $140 billion annually, as shown by the chart below.

Commercial Real Estate Market Spending 2010 Through 2021 Forecast
https://www.anderson.ucla.edu

Apartments & Industrial

Shulman points out the positive trends in two of the four largest commercial categories: apartments and industrial. A decline in homeownership from 64.8% to 64.2% means more people are renting (possibly due to delayed marriage and child-bearing among Millennials). This is why rental rates continue to rise by 3-4% per year and developers are building more apartments now than ever: 380,000 units annually over the last four years compared with 114,000 in 2010.

Median rent in Contra Costa County is well ahead of the rest of California, at nearly $1,766/mo across all housing types as of 2017 Q4. Respective state median rent is at $1,447 (Source: Department of Numbers).

Industrial rents rose at nearly double the rate according to the UCLA Economic Letter, between 6-8% annually. This is due in part to the rise in eCommerce business and the corresponding need for warehouse and distribution centers.

Office

Shulman identifies the threat that the coworking effect has on the office sector: declining square-footage per employee. The average employee has only 150 square feet of office space, down from the previous average of over 200 square feet. Office users’ decreasing space per employee results in higher office vacancy: now up to 16.6%.

Retail

The retail sector is what Shulman calls “the ugly” of the current commercial climate. The eCommerce boom has led nearly 6,000 retail locations to announce they’re closing in 2019. And although many online retailers are now opening physical locations, they maintain a fraction of the square footage of the retailers they are replacing. Shopping centers and malls are experiencing vacancy rates of 9-10%, comparable to recession-level rates.

As we can see, the commercial sector does not always ebb and flow as one, but each category is affected differently by shifts in the economy at large. As an investor, broker, or developer, it is important to keep a finger on the pulse of the market in order to make the best decisions for long-term success.

Effect on Commercial Real Estate Values

Trends in rental demand and usage will likely affect the value investors apply to individual real estate sectors. Those sectors with increasing vacancy will see declining values as investors weigh the greater risk and demand less of it for their portfolios or a greater return to offset the greater risk.

Those sectors with strong rent growth and lower vacancy (currently industrial and multi-family), will likely see strong demand from investors as the vacancy risk is lower and investors foresee rent growth. How soon investors start to make these adjustments is yet to be seen.

If you want to know how changes in the commercial market may affect the value of your commercial real estate, reach out to Maclennan Investment Group by email: peter@maclennaninvestments.com or phone: (925) 385-8798 and see how we can assist you.

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Filed Under: Real Estate Investing Tagged With: Commercial Real Estate, Commercial Real Estate Broker, Commercial Real Estate Investing, Industrial Real Estate

January 23, 2018 by Peter Maclennan Leave a Comment

Industrial Real Estate Hottest Sector in 2017 and Hot in 2018

Antioch Industrial Property

Industrial Real Estate Hot in 2017

According to a report, the hottest commercial real estate class is industrial property.

The industrial sector has emerged as the growth leader in commercial real estate, according to a new report by Morningstar, a notion that’s in agreement with the wider consensus about industrial now leading income-generating real estate. As a darling among owners and investors, apartments may still be strong, but the industrial sector is the rising star.

That’s thanks to Amazon and e-commerce as a whole. Industrial logistics space outperformed office, retail, apartment and even light industrial space in terms of supply, demand, occupancy and rent growth in the first half of 2017, noted the report. Read More… on Commercial Property Executive.

The article details that much of the growth is due to Amazon and other e-commerce companies.

As recent sales of industrial properties indicate, the availability of industrial land in core Bay Area markets is not growing.

Industrial Real Estate Stays Hot in 2018

According to research by NREI, industrial real estate and industrial properties should stay hot in 2018. A majority of survey respondents indicated that they expect the industrial market to continue expanding for at least a year. Almost 23% of respondents believe that the growth will last 2 years.

Fewer respondents were concerned about oversupply in the industrial real estate market. Over 80% of respondents indicated that the supply was just right or that there was too little supply. (Too little supply seems to be the trend in the San Francisco Bay Area.)

The experts that responded ranked the West as the top region, followed closely by industrial properties in the South.

Bottom Line:

All signs indicate that industrial leasing and sales will maintain a strong pace in 2018.


Maclennan Investment Group, Inc. offers leasing, investment, and property management services to clients in Contra Costa, Alameda, & Solano Counties. Our primary markets are along the I-680 Corridor from Pleasanton north to Martinez, including Danville, Alamo, Walnut Creek, Pleasant Hill, Concord, Pacheco, and Clayton. And also along Highway 4 from Concord east to Bay Point, Pittsburg, Antioch, Brentwood, Oakley, and surrounding Delta towns.

Please call today to see how we can help you find space for your business or fill up your building with high quality tenants. You can reach us at 925.385.8798.

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Filed Under: Industrial Real Estate, Investment Property, Real Estate Investing Tagged With: Amazon.com Inc, Commercial Real Estate Investing, Industrial Property, Industrial Real Estate, Investment Property

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Maclennan Investment Group, Inc.
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