Dynamics That Will Impact the Future of the Industrial Real Estate Market
The powerful influences of societal demand, economic circumstances, and the desire to improve, will continue to be factors of innovation within industrial real estate in the years ahead. In addition, a progressively unpredictable and complex supply chain will deliver increased pressure causing the industrial real estate sector to evolve in other ways too. Listed below are a few dynamics that will inevitably impact the future of industrial real estate and its market.
Progress in e-commerce transactions will push need for additional industrial real estate.
Double-digit growth in e-commerce transactions, the rise in commercial inventories, and higher gas costs are anticipated to drive demand for an additional 850 million square feet over the next five years.
Ironically, sales are not the only reason e-commerce companies will need more space. Product returns also pack shelves. Consumers are three times more likely to return products they purchased online versus products they purchased in a brick-and-mortar retail store. Consequently, e-commerce retailers need more space to handle reverse logistics in contrast to typical onsite sales.
Large economic swings are likely to reduce the rate of growth
Macroeconomic influences (e.g., deferred investing, inflation, and economic recession etc.), tenant requests, last-mile delivery, and quick technology development are prone to restructure demand and industrial building space design.
Technologically Advanced Buildings Created to Address Growing Tenant Requirements and Necessity
Many modern tenants value agility. This can be achieved by a facility replete with advanced technology and strategically located sites that are closer to their consumer base with reduced square footage. Industrial real estate investors and owners can more cost-effectively modify properties to accommodate tenants with smaller space requirements that use universal technology (e.g., robotic automation). “Smart facilities” offer advanced technologies that are unique to the market. Tenants are inclined to pay higher rent for these smart facilities, even in an environment of ample supply and competition.
Industrial Real Estate and Blockchain
As of 2022, the United States leads the world in Bitcoin mining which is increasing the need for industrial land and facilities to accommodate mining. Almost one-third of the top 100 U.S. companies have a complete functioning, live service that utilizes blockchain technology for processing.
Blockchain technology leverages Distributed Ledger Technology (DLT). Distributed ledger technology is a digital system that records transactions related to assets. These transactions and additional facts are concurrently and instantaneously logged at several places. The logged database will exist among quite a few participants or throughout several physical locations. A database logged through distributed ledger technology does not need a central administrator or centralized data storage. As a result, contract processes and procedures are accelerated and time and expenses decrease.
The use of a DLT increases transactional trust levels because of the superior transparency it provides for transactions. This transparency helps greatly in the world of real estate as trust in the forthrightness of a real estate listing, real estate website and even a real estate agent’s present and past transaction is critically important.