> Is It Wise to Incorporate Industrial Properties Into Your Real Estate Investment Portfolio?

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Is It Wise to Incorporate Industrial Properties Into Your Real Estate Investment Portfolio?

One of the most interesting real estate investing sectors is the industrial sector, especially in this age of rapidly growing global e-commerce. Amazon has over 100 fulfillment centers in the United States alone. For a store that sells merchandise online only, that’s a lot of real estate. Another online retailer, Overstock.com, recently announced it was opening a 517,000-square-foot warehouse in Kansas City, Kansas. Industrial real estate for e-commerce is a growing sector with a lot of opportunities for serious real estate investors.

But e-commerce is not the only business sector where industrial real estate investing opportunities occur. The question for today’s investor is, does it make sense to incorporate industrial real estate into your portfolio?

The Industrial Real Estate Market in 2018

Diversification is very important for any investment portfolio. That usually entails a good mix of assets in multiple asset classes, but investors must still perform their due diligence to pick the best investments within those asset classes. For real estate, the market in 2018 looks good for the industrial sector.

For the most part, rent growth is positive. According to JLL, the Class A market is burning hot, or it was in the second quarter at least. The Class B and C markets are much more competitive. Vacancies are stable and at an all-time low. The signals show that industrial rentals are strong.

The market is also looking good for new construction. Up by 3.7 from Q1 2018, investors looking for opportunities in the industrial real estate sector should be able to find them quite easily.

Factors Driving the Industrial Real Estate Market

According to Reonomy, industrial real estate demand currently outweighs supply, but supply is closing in. There was 35 million square feet of new industrial real estate constructed in Q1 this year, with 42 million square feet set for later development. Investors should consider these trends before making any major investment decisions.

As mentioned earlier, the growth of e-commerce is driving industrial development all around the world. In 2017, online sales accounted for 9% of all retail sales. That figure is expected to increase to 12.4% by 2020. You can bet it won’t stop there.

As companies like Amazon and Overstock expand their product offerings and expand geographically, they will continue to build out distribution and fulfillment centers. In January this year, Amazon opened its first brick-and-mortar grocery story, Amazon Go, in Seattle, Washington and is planning a second store this fall. Geekwire reports Amazon has almost 600 brick-and-mortar retail locations, including bookstores, pop-up stores, and package pick-up locations. While these storefronts fall more into the retail real estate category, retail stores are fed from distribution centers, which are classified as industrial. As e-commerce expands, and that includes smaller online merchants who will need to fulfill physical product orders, there will be a higher demand for fulfillment and distribution centers to meet the demand for these products.

Industrial real estate investment includes various considerations regarding distribution, storage, warehousing, manufacturing, assembly, production, and more across various industries. For that reason, real estate investors should perform thorough own diligence and consult a financial advisor before making any major investment decisions.

Recently Funded Sharestates Industrial Loan

Warehouse Facility in Salem, New Jersey

Recently Funded Sharestates Industrial Loan

Office and Retail Facility in Toms River, New Jersey

Recently Funded Sharestates Industrial Loan

Warehouse Facility in Baltimore, Maryland

Recently Funded Sharestates Industrial Loan

Warehouse Facility in Newark, New Jersey

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