Industrial real estate, a sector of commercial real estate once considered steady and uninspired, is beginning to look more enticing in St. Louis and beyond. A bullish market and unique Midwestern climate now makes for a safe, stable environment for investors to build their portfolios.
So why now? Demand for warehouse and industrial space may have waned during the recession, but vacancy rates in St. Louis have been falling since 2013. What’s more, lease rates are climbing, even as additional space is brought to market.
The trend extends beyond the Midwest, as vacancy rates for the 2nd quarter of 2015 reached a 10-year low of 7 percent, according to National Real Estate Investor. In fact, NREI reports that national warehouse and distribution center rents are up more than five percent from a year ago, and total net absorption is up 17 percent, having risen each quarter for almost two years.
E-commerce has been driving the need for bulk space, especially since bulk warehouses in St. Louis total only 30 million square feet of space within the city’s approximately 230 million square foot industrial real estate market, according to the St. Louis Post Dispatch. Developments are also increasing to meet industrial needs nationwide, with 157.7 million square feet of space currently under construction, up more than 20 percent compared to last year.
Need more incentive to invest? Overall, industrial properties generally present fewer management headaches, as tenants often manage minor building needs independently and extras like landscaping don’t apply. Plus, industrial properties provide the flexibility to meet varied tenant requirements, by offering office and warehouse space within zoning guidelines. Finally, the stability of industrial real estate is desirable, as longer standard leases mean less turnover and shorter vacancy periods.
For those interested in greater long-term stability, the market is ripe for industrial real estate investments. Contact one of the commercial real estate professionals at Intelica to learn more about opportunities in the St. Louis market and beyond.