• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer
Limon Net Lease Group

Limon Net Lease Group

  • Listings
    • National Listings
    • NYC Metro Listings
  • Who We Are
  • 1031 Exchange
  • Research
  • Financing
  • Services
    • Advisory
    • Capital Markets
    • Marketing
    • Research
    • Technology
  • Contact

2022 U.S. Industrial Investment Forecast Report

March 24, 2022 by Marcus & Millichap Research Services

National Industrial Overview

  • The health crisis had a major impact on industrial tenants. The requirement to social distance led to a surge in e-commerce sales, necessitating expanded operations for greater direct-to-consumer deliveries. Intermittent closures of production facilities and ports has also fostered extreme backlogs in the global supply chain. Long lines of cargo vessels waiting to be unloaded has put pressure on major ports to expand, as well as distributors and retailers to augment their warehousing space. Some shipping has been diverted to smaller ports, boosting space demand.
  • The surge in demand is producing historically strong property performance metrics. A record 520 million square feet was absorbed on a net basis in 2021, as vacancy fell to a multidecade low. A robust appetite for space will push vacancy even lower this year, despite the largest construction pipeline since at least 2000. Approximately 420 million square feet of industrial space will be delivered this year, with developers focusing on larger properties. Buildings under 100,000 square feet in size comprise only a small amount of arriving space. The difficulty in developing smaller facilities closer to population centers, paired with the avid demand for such projects, will continue to apply upward pressure on rents.

Industrial Investment Outlook

  • Investors have taken note of the sector’s benchmark-setting performance fundamentals, leading to an all-time high number of industrial assets changing hands last year. Institutional buyers with experience in other commercial properties are now entering the industrial landscape, as part of diversification strategies.
  • The considerable demand for properties has driven the average sale price in the United States up by over 35 percent since 2019 to $133 per square foot entering this year. As prices climbed, cap rates have compressed. The mean yield across the country was in the mid-6 percent range as 2021 came to a close, with top-tier assets in the most sought-after locations changing hands with initial returns under 4 percent.
  • Ongoing, elevated inflation is applying upward pressure to interest rates. The rising costs of capital are narrowing transaction margins, which may prompt owner-users to make new arrangements. More companies may opt to enter into a sale-leaseback now, locking in a long-term lease at more favorable terms than where lending rates are currently trending.

Modern Consumption Trends Underpin Industrial Facilities as an Increasingly Essential Property Type

  • Pandemic-accelerated distribution and warehouse needs still growing. The health crisis had a major impact on industrial tenants. The requirement to social distance led to a surge in e-commerce sales relative to in-store shopping, necessitating expanded operations for greater direct-to-consumer deliveries. Demand increased for both large distribution centers that could serve whole regions, as well as smaller infill locations closer to where consumers live to facilitate rapid delivery.
  • Record development not able to exceed hearty tenant demand. The shift in industrial space needs, propagated by COVID-19, has had a profound impact on property fundamentals. A record 520 million square feet was absorbed on a net basis in 2021, fostering an equally noteworthy level of rent growth as vacancy fell to a multidecade low. A robust appetite for space will push vacancy even lower this year, despite the largest construction pipeline since at least 2000.

2022 National Industrial Outlook

  • Mismatch between production and transport capacity continues. Production output, at least within the United States, has returned to levels recorded before the health crisis; the amount of tonnage being transported by truck, however, continues to lag. A shortage of drivers is constraining the ability to transport goods across the country. If this dynamic persists, it may solidify businesses’ plans to shore up inventories.
  • Airports gain even more logistical prominence. An expectation of rapid delivery, established pre-pandemic, has collided with prodigious backlogs at major cargo terminals. In order to transport some goods more quickly, companies have turned to airfreight. The volume of cargo transported by air has increased throughout the health crisis, underscoring demand for distribution and warehouse space at inland airport hubs.
  • Advanced manufacturing driving new space needs. The recent supply chain disruptions may prompt more firms to bring their production processes closer to home in the years to come. Advanced manufacturing is already making a prominent return to the U.S. in the form of new semiconductor plants situated across the country, as well as electric vehicle production. The numerous support businesses will fill space nearby.

Sources: Marcus & Millichap Research Services; American Council of Life Insurers; Blue Chip Economic Indicators; Bureau of Economic Analysis; Commercial Mortgage Alert; CoStar Group, Inc.; Irving Levin Associates; Moody’s Analytics; Federal Reserve; Foresight Analytics; Mortgage Bankers Association; Real Capital Analytics; RealNet; Standard & Poor’s; PNC Healthcare; The Conference Board; Trepp; TWR/Dodge Pipeline; U.S. Bureau of Labor Statistics; U.S. Census Bureau; U.S. Department of Health and Human Services; USGS; U.S. Securities and Exchange Commission; U.S. Treasury Department.

© Marcus & Millichap 2022

Download the Full Report Here

Filed Under: Research Brief

Primary Sidebar

Recent Posts

  • New Tax Bill May Bolster CRE Investment Climate
  • Interest Rates on the Rise
  • Understanding Today’s CRE Distress Landscape
  • Can the Office Market Regain its Footing in 2025
  • Retail CRE Positioned to Withstand Potential Headwinds

Archives

  • June 2025
  • May 2025
  • April 2025
  • March 2025
  • February 2025
  • January 2025
  • December 2024
  • November 2024
  • October 2024
  • September 2024
  • August 2024
  • July 2024
  • June 2024
  • May 2024
  • April 2024
  • March 2024
  • February 2024
  • January 2024
  • December 2023
  • November 2023
  • October 2023
  • September 2023
  • August 2023
  • July 2023
  • June 2023
  • May 2023
  • April 2023
  • March 2023
  • February 2023
  • January 2023
  • December 2022
  • November 2022
  • October 2022
  • September 2022
  • August 2022
  • July 2022
  • June 2022
  • May 2022
  • April 2022
  • March 2022
  • February 2022
  • January 2022
  • December 2021
  • November 2021
  • October 2021
  • September 2021
  • August 2021
  • July 2021
  • June 2021
  • May 2021
  • April 2021
  • March 2021
  • February 2021
  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • March 2020

Categories

  • Agent Opinion
  • Apartments
  • Client Webcast
  • Employment
  • Eviction Moratorium
  • Fox Business
  • GDP
  • Investor Sentiment Survey
  • M&M In the Media
  • Market Report
  • Multifamily
  • Multifamily
  • NYC Metro
  • Outlook Report
  • Research Brief
  • Retail
  • Self-Storage
  • Special Report

Footer

© 2025 Limon Net Leased Group

  • Listings
    • National Listings
    • NYC Metro Listings
  • Who We Are
  • 1031 Exchange
  • Research
  • Financing
  • Services
    • Advisory
    • Capital Markets
    • Marketing
    • Research
    • Technology
  • Contact

This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. References to square footage or age are approximate. Buyer must verify the information and bears all risk for any inaccuracies. Any projections, opinions, assumptions or estimates used herein are for example purposes only and do not represent the current or future performance of the property. Marcus & Millichap Real Estate Investment Services is a service mark of Marcus & Millichap Real Estate Investment Services, Inc. © 2020 Marcus & Millichap and Limon Net Lease Group

Privacy Policy