The U.S. economy has clearly shifted into a higher gear, fueled by soaring business and consumer confidence, stock market wealth, stronger global growth, and tax cut stimulus.
Showing few signs of fatigue, the economy is positioned for continued growth through 2020 – albeit at a slightly slower pace, according to our firm’s tracking of worldwide metrics such as consumer spending, global trade, manufacturing, and intermodal rail volumes.
Real GDP growth, for example, is on-track to reach a cyclical peak of 2.7% for 2018, while 2019 is forecast to hit a solid 2.4%.
Given that commercial real estate tracks well with the broader economy, we expect 2019 to be a strong year for the property markets, including industrial real estate, according to our Spring 2019 Industrial U.S. Outlook & Trends.
Relied upon by industry, insiders, media, and trades, the outlook takes a deep dive into the U.S. industrial market, and also includes investor surveys.
Job gains between 2010 and 2018 were estimated to be 27.3 million, with 5.7 million of them concentrated in the industrial-related industries. Real consumer spending is also forecast to grow 2.6% in 2019 – a growth rate more than sufficient to power demand for industrial real estate.
We expect 3.6 million newly created jobs in 2019 and 2020 with roughly 680,000 of those concentrated in industrial industries.
The appetite remains very strong for well-located Class A assets with access to transportation hubs, such as rail, port, and intermodal services. Intermodal and international port access are in high demand and remain the most efficient means of shipping, as logistics and supply chain fundamentals are critical in today’s industrial environment, both from an investor and user perspective.
Investors have signaled that the U.S. markets with the most aggressive industrial pricing are on the coasts: Southern California, New Jersey, Seattle, and South Florida. Other high-growth markets include Atlanta, Chicago, Dallas, Houston, Eastern/Central Pennsylvania, and San Francisco.
All of this generally positive news is not to say there isn’t some industry caution. Pricing and overall rates are beginning to stabilize, and while investors are cautiously optimistic, the U.S. industrial market is heavily dependent upon the global economic climate, global geopolitical factors, and access to credit.
Overall, with strong infrastructure in place in most U.S. markets, and the availability of natural resources, the long-term investment outlook for the national industrial market is positive. Seaport cities and major logistics hubs are expected to remain the strongest performers, especially with eCommerce continuing to fuel the U.S. economy.
For a detailed look at the industrial market and to view our investor survey results, click here.
by Michael Schaeffer, MAI, FRICS, Executive Managing Director/Industrial Practice Lead, Valuation & Advisory; Mike Tenteris, Managing Director, Capital Markets, Industrial Advisory Group; Jason Tolliver, Americas Head of Logistics & Industrial Research; and Carolyn Salzer, Analyst, Americas Logistics & Industrial Research