REASONS WHY INDUSTRIAL KEEPS BOOMING

A great deal of the demand for industrial space to come from firms that produce and distribute consumer goods," says Thomas Bisacquino, NAIOP president and CEO.

Net demand for industrial space could reach 242 million square feet in 2015, thanks to the US economy’s accelerated growth through the end of 2014 and its robust indications of strength for 2015. So says a new NAIOP Research Foundation report.

“We expect the first half of 2015 to be slightly more robust than the second half, as pent up demand is satisfied and the economy starts to temper,” Dr. Joshua Harris, University of Central Florida and a NAIOP Distinguished Fellow and study co-author, tells GlobeSt.com. Dr. Hany Guirguis of Manhattan College is the report’s co-author.

According to the NAIOP report, the consumer segment of the economy appears healthier than it has since 2007, before the Great Recession. Specifically, retail spending has set new record highs almost every month and unemployment has hovered around the near full employment level of 5.6% as of December 2014.

The NAIOP reports indicates the appearance of some gains in real wages in industries, such as leisure and hospitality and information. What’s more, the researchers said the recent decline in oil and gasoline prices offers a strong stimulus to many lower- and middle-income families—and that will translate into increased consumer productivity.

“A great deal of the demand for industrial space to come from firms that produce and distribute consumer goods, and that’s why commercial real estate is seeing such a boom in e-commerce fulfillment and distribution facilities,” Thomas Bisacquino, NAIOP president and CEO, tells GlobeSt.com. “Another leading sector is automotive, which has grown considerably—auto sales are up 6.03% in 2014—and is strongly recovering from the recession.”

Finally, Guirguis and Harris note one gloomy sector of industrial demand will likely be oil and gas producers and their servicers, contractors and suppliers. The fall of oil prices to below $50 per barrel is assuredly going to translate into reduced oil exploration activities in the US and elsewhere as supply outshoots demand.

The conclusion: The NAIOP study authors believe losses in industrial space due to energy price weaknesses will be more than made up by gains in consumer-serving industry demand. Nevertheless, regional differences are likely to occur.