January 24, 2018 / News

DCT® Featured on REIT.com: Outside of E-commerce, What Will Drive Industrial Real Estate Fundamentals?

An Article on REIT.com by Sarah Borchersen-Keto
Published in the January/February 2018 Issue of REIT Magazine

Outside of E-commerce, What Will Drive Industrial Real Estate Fundamentals?

Jim Connor, Chairman and CEO, Duke Realty Corp. (NYSE: DRE)

We believe that the four most likely industrial drivers will include significant growth in logistics for food and beverage products. Amazon’s acquisition of Whole Foods is just the first of many changes we can expect.

Health care is another driver of fundamentals. With 10,000 baby boomers reaching retirement each day, the logistics of drugs and medical supplies to hospitals and medical office building facilities will only continue to grow.

The continued growth and prosperity of “healthy retailers” will also play a role. Those companies will continue to invest in their logistics and supply chain models to get products to their customers faster and more efficiently.

Meanwhile, last mile facilities will continue to be a focal point and an area of significant growth as consumers want everything either overnight or in two hours.

Gordon DuGan, CEO, Gramercy Property Trust (NYSE: GPT)

While e-commerce is providing a huge secular tailwind to the industrial real estate marketplace, industrial properties are also benefiting from good economic growth globally as well as continued economic growth in the United States.

We have seen examples of “re-shoring,” where U.S. or global manufacturers are moving production and automation into the U.S., as well as examples of growing wages in developing countries, which is cutting down the benefits of off-shore manufacturing.

Another important driver is the shift to having a logistics footprint that is closer to population centers, whether to service traditional retail, local distribution needs or e-commerce.

Phil Hawkins, President and CEO, DCT Industrial (NYSE: DCT)

Disciplined new supply will be just as important as robust demand in fostering a healthy market environment for distribution space. As distribution building users have shifted their focus towards infill locations to get even closer to their customers, developers encounter substantially greater community resistance to increased traffic and noise. This, combined with understaffed municipalities’ building departments, is increasing the duration and cost of the approval process and in some cases leading to rejection or significant curtailment of proposed projects.

Given the positive outlook for healthy demand and rational levels of new supply, we are optimistic that the vibrant business environment we have enjoyed over the past five years will continue through the next five.

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