Industrial Real Estate
Though global macroeconomic risks remain, investors have the potential to acquire high quality industrial assets in select markets at below-replacement cost and below previous peak market values, creating the potential for attractive investment returns over the next several years.
Industrial property investments offer a number of advantages, such as:
Stable and predictable cash flow
High income returns/distributable cash flow
Lower operational risks and less CAPEX intensive than other property types
Relatively stable supply and demand characteristics
In addition to these long-term benefits of investing in industrial real estate, the recovery of the industrial sector is relatively late in this real estate cycle, suggesting that much value appreciation is still to be realized. Most industrial markets have experienced strong leasing activity and solid net absorption.
We are seeing an urbanization renaissance in the U.S. right now. Dilapidated industrial buildings are being turned into hip night clubs and chic lofts, while very little new industrial construction is occurring in the urban and suburban areas. Industrial buildings will continue to appreciate as population density continues to increase in these areas. As former industrial areas are being rezoned, such as South San Francisco’s Cabot, Cabot, and Forbes area, there is less room for suppliers and distributors to access and store their inventories. From an investor’s supply/demand perspective, this means that industrial should only become more valuable in these areas as businesses long to be closer to the cities they supply.
Demographics dictate increasing demand for senior housing properties. The 79 million Baby Boomers are getting older, and living longer. Their generation is 27% larger than the preceding group. With 7,000 to 10,000 Baby Boomers turning 65 each day through 2030, demand for senior housing will continue to increase.
The U.S. population is aging rapidly, and with millions of baby boomers getting ready to retire, there will be a tremendous need for senior housing. In fact, during the 20-year period from 2010 to 2030, the 65-plus population is expected to grow by 78%.
In addition, the market is highly fragmented. The healthcare real estate market is estimated to be about $1 trillion in size, and even the largest REITs have less than a 3% market share. So there is tremendous opportunity for consolidation ahead.
Others: We will consider Multi-family as well as other commercial real estate as long as the fundamental are in line with our expectations.