Pandemic Intensifies Demand for Industrial as Online Channel Grows
Last quarter, Oxford Properties Group (Oxford), a Canadian behemoth in real estate investment, cemented a deal to become the new owner of 14.5 million square feet of industrial property for $2.2 billion. The new property is being purchased from KKR & Co. and is all located in the U.S., spread out amongst 149 buildings close to high population centres. The huge investment is seen as a bet by Oxford that online shopping will continue to grow as will the demand for warehouse space that can facilitate one-day or same-day shipping.
Post Pandemic: Industrial > Office
Leading up to the pandemic, industrial property was already on the rise as keen investors saw the benefit of owning warehouse space near population centres to facilitate quick shipments. The pandemic only accelerated this growth. Not only did the onset of the pandemic rapidly increase the adoption of online shopping but also highlighted the precariousness of dependency on overseas supply chains. As the pandemic restrictions made trade with Asian countries impossibly long for etailers and retailers, the value of having goods on hand rose substantially.
Business Behaviours are Changing
“Business owners are increasing the amount of inventory they’re keeping in the U.S.,” KKR’s head of real estate acquisitions comments to the Wall Street Journal. This is, in turn, accelerating the rise in the value of industrial profiles as yields from such investments have fallen 1% over the past four years, indicating a rise in prices. Even if consumers veer away from online and trend back to in-store shopping, the value of having inventory in close proximity has been shown.
Oxford’s Move Part of Strategy
Oxford’s foray into the U.S. is not the firm’s first outside of Canada as it owns industrial property in both Asia and Europe; however, the purchase represents about 4% of the juggernaut’s total $55.7 billion of assets under management, which is substantial. This recent purchase is part of a four-year move by the firm to make in-roads into the U.S. market. Oxford has already made large investments in cold-storage facilities and U.S. regional distribution centres, some as large as massive as one million square feet.
Takeaway for Investors
Commercial real estate investors unhappy with yields from office tower investments, do not like the risk profile of retail investments or find multi-residential investment too expensive would be wise to look into shifting their investments to industrial properties poised to capitalize on a post-pandemic world of increased online shopping and demand for same-day delivery.
Interested in broadening your investment portfolio to industrial properties? At MCRE, our experienced team members are not only commercial real estate agents, we’re also commercial real estate investors. We’ve been in the trenches and we’ve made the big mistakes—more importantly, we now know how to avoid making the big mistakes.
For the best return on your industrial real estate investment, ensure you have the professional and experienced team at MCRE on your side!
Contact MCRE’s Industrial Sales team today!