#140 – Inside Our Industry – Strategies for Overcoming Industrial Real Estate ChallengesPosted on
As our loyal readers know, Agracel is an industrial real estate developer primarily focusing our work in secondary and tertiary markets. We also spend a great deal of time researching industries and trends, ensuring that we are meeting the growing demands of today’s industrial customers. The following excerpt from AreaDevelopment.com hits on the topics of low vacancy rates and the decline in speculative real estate projects, key market indicators for us. Click on the link below for the full report.
Strategies for Overcoming Industrial Real Estate Challenges
Corporate leaders should consider the following approaches to achieve their growth objectives during this period of industrial real estate limitations:
- Build extra room into timelines. Corporate location and expansion processes have moved at breakneck speed over the past few years. While this velocity is unlikely to wane, it is important for executives to force discussions about their industrial real estate needs to the forefront. Adding 90–180 days to the front end of traditional timelines will help companies avoid roadblocks and create more successful outcomes.
- Cast a wider geographic net. As availability of modern industrial real estate continues to diminish, a preconceived location may not be viable. Even if a company finds a workable existing building, the lease/purchase costs may be prohibitive. By building extra room into timelines, executives can expand their search areas. This work should take two forms:First, investigate multiple regions of the country. Evaluate and understand these different markets early in the process and maintain pathways to occupancy in at least two different regions until one of them is inked.Second, consider secondary and tertiary locations. The top 20 metros deservedly attract a lot of attention, but executives should challenge their teams to consider metros 21–50+, as there are lots of viable locations in that group for most operations.
Bonus: some of these tertiary communities undertake speculative industrial development on their own. This means they may provide more cost-effective solutions as they are less inclined to follow the market in ratcheting up lease/sale rates.
- Have a plan B. In this case, B stands for build-to-suit. In the current economy, it is uncommon for companies to prefer a build-to-suit industrial real estate solution. Despite the preference for an existing building, a build-to-suit option should be prepared, especially if location is inflexible.
- Look for communities that prioritize partnerships. In the face of current market conditions, real estate developers are tempted to sit and wait. This makes public-private partnerships key to avoiding stagnation and spurring development. States, regions, and communities that choose to be aggressive and seek out engagement and investments with the real estate development community will separate themselves from the pack. Proactive regions that find ways to deliver speculative industrial space in 2024 and 2025 will find themselves in a position to attract growth while much of the country scrambles to recover from a period of development lethargy.