Industrial Trends to Watch in 2017

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lambert-farms-spec-buildingMetro Atlanta evolved in recent years as a regional hub for distribution, warehouse and e-commerce fulfillment centers. Atlanta is situated along main interstates, rail lines and offers easy port access to Port of Savannah. Demand for large-scale warehousing projects such as Lambert Farms is stronger than ever. What can the industrial sector expect to see moving into 2017?

Even with positive insights for 2017, JLL’s Chief Industrial Economist Walter Kemmsies said, “The only safe prediction for 2017 is that many things are going to change. There are numerous factors that could impact the freight movement industry next year and beyond, ranging from changes in trade policies and regulations to specific issues that affect how goods are transported. However, the need for infrastructure investment and the continued proliferation of e-commerce will keep industrial real estate booming.”

JLL identifies five factors that will impact the sector in 2017:

  1. The infrastructure revival. The urbanization of U.S. cities cannot continue with functionally obsolete roads, bridges and other infrastructure; as upgrades are planned, raw materials will be needed, and warehouses to store them. Investing in the Rust Belt’s infrastructure would mean reviving dozens of Mississippi waterway terminals that served a dated American manufacturing-based economy. Already zoned for industrial use, these ports are being repurposed to transport materials needed to build infrastructure for new industries driving the U.S. economy.
  2. E-commerce and urban logistics continue rapid evolution. Online shopping and consumer demand for rapid delivery is changing what, where and how many distribution centers are needed to feed the consumer e-commerce appetite. In the second half of 2016, growth in e-commerce, coupled with industrial occupiers expanding their presence in new U.S. markets, helped the national industrial market’s vacancy rate reach a 16-year low, pushing below 6 percent. This number is expected to continue declining in 2017.
  3. Ports benefit from both infrastructure updates and e-commerce. The revival of America’s ports system is driven by the consumer economy and the need for surrounding warehouse and mixed use infrastructure. The coastal ports of Los Angeles and New York/New Jersey have been the darlings of the industrial sector. However, with the revival of infrastructure and the repurposing of obsolete terminals, 2017 could be the year the Mississippi waterway reclaims its former glory in the global supply chain. Demand for industrial real estate in the region is expected to follow.
  4. Institutional investor interest is higher than ever. Institutional capital still views industrial real estate as a lucrative investment opportunity. In fact, year-end industrial investment sale volumes could reach upward of $45 billion, the second largest annual tally since 2008. This investment activity is indicative of the asset class’s ability to weather global economic, political and financial uncertainty.
  5. The rise of creative industrial real estate development. As demand for industrial real estate continues, companies could employ new and creative real estate strategies. Unprecedented industrial real estate demand and the push to improve last-mile delivery services may influence development throughout the country, persuading some companies to seek space in secondary or tertiary markets such as Charlotte, Tampa Bay and Kansas City. Smaller urban core warehouses and fulfillment centers, reconverted assets and multistory warehouses could become last-mile solutions for many companies in 2017.

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