On today’s show we are talking about industrial and what can happen when investors move en masse toward the same target. The folks at Marcus & Millichap issued a wave of mid year updates on the industrial sector for almost all of the major markets across the US. 

The thesis is that with the growth of e-commerce and with supply chain constraints during the pandemic and with geopolitical risk, there would be need for more warehousing in North America.

We humans have a tendency to project current market conditions into the future. This is called recency bias and is not necessarily indicative of long term trends or needs. 

A lot has been built and it’s not clear that the demand is there to absorb all of this new supply. It’s likely that the vacancy is migrating to some of the older product in the market. Asking rents are up in all markets. Asking rents are up 19% in Dallas, 31.9% in Charlotte, 5.6% in NYC and 12.3% in Austin. These rent increases are impressive, but remember these are asking rents. They are not backed by leases. I’m sounding a tiny alarm bell that this sector is showing signs of being overheated and I’m expecting a softening in the coming year. Investing in industrial right now could have elevated risk. 


Host: Victor Menasce

email: podcast@victorjm.com