Market conditions indicate slower growth in industrial real estate sector

E-commerce, market oversupply, rising interest rates to dampen hot market.

June 07, 2019 |

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The industrial real estate sector is likely heading for slower growth, according to a forecast published by the Deloitte Center for Financial Services.

The sector, composed of warehouses, distribution centers, flex spaces, and other industrial buildings with storage facilities, has seen sustained demand over the past five years. But potential marketplace shifts including growing e-commerce demand, market oversupply, rising interest rates, and a higher cost of capital will likely mean slower growth, the report says.

While warehousing continues to be robust, the looming deceleration in demand growth is going to put pressure on owners to become more creative in how they use and buy industrial real estate, Deloitte says. More than 30% of U.S. warehouse buildings are more than 50 years old, and the average age of all warehouse properties is 34.

With the cost of capital rising and supply ballooning, retrofitting spaces, identifying new warehousing models, and developing smarter facilities will become necessary.

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