Industrial remains a favored sector with demand driven by the broadening adoption of e-commerce, obsolescence of existing industrial stock, and nearshoring/onshoring trends. The convenience and choice of online shopping is evidenced by the 96% increase in e-commerce sales from 2019 to 2023 versus a 34% increase in total retail sales during the same period.
Although vacancy rates have expanded in recent years as a result of oversupply in certain markets, Q2 2024 national vacancy rates of 6.5% are below the 20-year average of 7%. Above average occupancy rates are expected to drive market rent growth of approximately 3% over the next few years. Additionally, seasoned assets with five- to seven-year leases rolling in the near term are anticipated to see a significant re-leasing spread of 20% or more in some markets. If these trends materialise as projected, it could lead to NOI growth of at least 5% over the next five years. Supporting demand for new product, nearly three-quarters of industrial inventory in the US is at least 20 years old and does not meet the needs of modern users. Furthermore, construction starts have sharply declined to 10-year lows beginning in late 2023. Finally, industrial warehouse sales remain strong, reaching $36.5bn in H1 2024, representing a 6% increase from the 2015-19 average. CHC believes the macro demand drivers coupled with the oncoming decline in supply will sustain revenue growth and demand for high-quality, well-located industrial real estate for years to come, especially in high-barrier, high-growth markets.
COMPLIANCE STATEMENT
The information contained herein is for illustrative purposes only and is intended for qualified investors and is not to be construed as an offer, solicitation, or recommendation with respect to the purchase or sale of any security and is not intended to constitute and may not be relied upon for legal, tax, or accounting advice. Investors should consult their legal, tax counsel, to determine which opportunity is best for their investment. The information shown is considered to be accurate as of the date of delivery or as otherwise indicated in the material, and CHC has no obligation to disseminate any updates or revisions to any information contained herein. Certain information in these materials may be deemed to constitute “forward-looking statements, which are necessarily based upon speculation, expectations, projections, and assumptions that are inherently unreliable and subject to certain significant business, economic, market, and competitive uncertainties and contingencies. Sources can be provided upon request.
