What is Industrial Real Estate?
Industrial real estate is an umbrella term for manufacturing, production, research and development, storage and distribution facilities. While industrial real estate is sometimes overshadowed by glitzier sectors like residential, commercial and retail, industrial real estate shouldn’t be overlooked as an essential enabler of global commerce and as a resilient, income-generating asset class.
Industrial real estate makes the global economy hum. Well-located, high-quality industrial real estate keeps the world’s supply chains working, enables trade and e-commerce, and ensures the efficient movement of goods from makers to markets.
Aren’t industrial real estate facilities like warehouses mostly used for storing stuff?
No. Most industrial real estate facilities are dedicated to keeping the world’s goods in motion. Very few of the goods in industrial real estate buildings are in storage. Where industrial real estate buildings are used for distribution, their contents are in motion to retail stores, businesses, or end consumers through e-commerce fulfillment channels. Where industrial real estate buildings are used for manufacturing, their operations are often tuned for just-in-time production and distribution that keeps pace with end-user demand—which means relatively little inventory is left sitting in storage.
What drives demand for industrial real estate?
In short, everything. Consumption is the main driver of industrial real estate demand, which comes as no surprise since consumption accounts for the majority of all economic activity. Trade is another key driver of demand. Industrial real estate facilities are key nodes in the global trading system, allowing the convenient and efficient movement of goods through the supply chain to end consumers. Then there’s supply chain reconfiguration. In developing markets, companies are upgrading from smaller, outdated industrial real estate facilities to newer, larger industrial real estate buildings with modern features and upgrades. In all other markets, as the relative attractiveness of manufacturing locations and transit routes shifts, as new consumer markets rise to prominence, and as same-day and next-day delivery become the new normal, companies adjust nodes in their supply chains, driving demand for new industrial real estate buildings in new locations.
Where are industrial real estate facilities located?
There are two basic location strategies for industrial real estate. Much industrial real estate is located adjacent to key transportation hubs – seaports, highway and rail junctions and airports. Increasingly, in response to burgeoning e-commerce and consumer demand for same-day and next-day fulfillment, industrial real estate facilities are located in infill locations within or proximate to large population centers.