Both domestic and foreign buyers have been investing in large parcels of industrial property across the U.S. and purchases have greatly boosted the sector over the past year. Canada has invested the most with $1.4 billion in purchases in 2013 alone, while South Korea following in its footsteps with more than half a billion in buys. Other big spenders in the market include Germany, Kuwait and Mexico as they look to expand operations in the West. One large market is for distribution centers that will serve online retailers like Amazon as Internet shopping absorbs more and more consumer spending. For more on this continue reading the following article from National Real Estate Investor.
The success of the U.S industrial marke has attracted major attention for new distribution centers and manufacturing facilities. It's also generated interest from foreign investors, particularly Canada and South Korea.
According to an Avison Young study, Canadian investors have almost tripled spending for U.S. industrial space in the past three years, boosted by the similarities in property deal procedures. Investors from the Great White North spent $1.4 billion on U.S. distribution properties in 2013, with the biggest deal being the 75-building portfolio sale to Brookfield Property Partners by IDI, totaling 27 million sq. ft. Other buyers were Bentall Kennedy buying a new 1.1-million-sq.-ft., Amazon-occupied distribution center in Haslett, Texas and Dalfren American Corp., which purchased about 300,000 sq. ft. in Minneapolis, Phoenix and Plainfield, Ind. Dalfren plans to spend another $110 million in U.S. markets by 2015, according to the study.
Earlier in the year, South Korea-based Heitman JV National Pension Service paid $543 million for a 22-building portfolio in southern California and Seattle, totaling six million sq. ft. bought from DEXUS Property Group. The other top three foreign investment leaders in the U.S. industrial market in 2013 were Germany at $310 million, Kuwait at $145 million and Mexico at $65 million, according to the Avison Young paper.
Other countries are now joining in, with firms such as wholesaler Yosen Group Inc. opening a new business unit in major U.S. markets. “The time is ready now for Yosen to commence our international trade and wholesale business starting with New York City,” said CEO Zhenggang Wang in a recent statement.
Most of the properties sought were in the West Coast cities of Seattle, Los Angeles and the Inland Empire, with $130 million going to Cincinnati properties and $112 million being spent in Chicago. Continued movement will be seen in the secondary markets, according to Avison Young, as rent increases price some investors out of the major markets.
The industrial market in 12 of the major U.S. regions improved to a preliminary availability rate of 10.6 percent in the fourth quarter, according to a recent CBRE report, down from 10.9 percent in the third quarter. The promise of high rents has brought a number of new announcements in the fourth quarter, such as the redevelopment of the Northern Pump Co. site in Fridley, Minn. to a 1.7-million-sq.-ft. industrial and flex park. Also, a joint venture of Brennan Investment Group LLC and DLJ Real Estate Capital Partners said it plans to build one of the first spec developments in the O’Hare market in Chicago, the Northeast O’Hare Industrial Center, in Des Plaines, Ill.
What’s been most surprising, however, is the resurgence of manufacturing. Companies are actively looking to expand manufacturing and are researching various markets such as Nashville and South Carolina for land costs and job availability, according to experts such as Colliers, Transwestern and Voit. This interest has led to a few Fortune 500 expansion announcements this month, with Whirlpool moving washing machine production from Mexico to its 2.4-million-sq.-ft. Clyde, Ohio plant, and Electrolux adding 810 new jobs and expanding its headquarters in Charlotte, N.C.
Officials from these cities, and across the country, say they’re getting a lot more interest from owners looking to expand or add new manufacturing facilities. Automotive growth is spurring a lot of the activity, as Ford’s $1.1 billion expansion of its Kansas City, Mo. Assembly Plant is encouraging suppliers to follow suit, with Grupo Antolin North America recently announcing its plans for a new facility there. “Missouri’s friendly corporate climate and close proximity to major automakers put us in a position to better serve our clients and continue to grow,” said Max Rogers, president of Grupo, in a statement.
This article was republished with permission from National Real Estate Investor.