Industrial Real Estate Roundup: Investors capitalize on COVID effects
Real Estate Roundup is a regular overview of the developments in the world of industrial real estate for logistics and transport. This week: Black Creek Group, Dream Industrial and Plymouth Industrial start operations.
Certain industries got through the past eight months with little good news – hotels, retailers, and colleges, to name just three.
But some industries did well during the COVID-19 pandemic, and the current era could be described as undeniably positive.
Industrial real estate is one of these sectors.
See some recent comments from companies in the real estate space dealing with storage, distribution, logistics, shipping containers, and ports.
Black Creek Industrial REIT IV, a mutual fund managed by the Denver-based Black Creek Group, succinctly described the situation in a recent document filed with federal regulators.
“While no real estate sector is immune to COVID, the industrial real estate sector in which we invest continues to outperform most real estate sectors,” the fund management said in a November 13 document.
A quick look at Black Creek’s portfolio is proof of the pudding. This particular fund owns 126 properties nationwide, evenly distributed across the country, but also with large holdings in California, Dallas and the mid-Atlantic. Most of his properties are warehouse distribution facilities.
Tenants include Amazon, XPO Logistics (NYSE: XPO), Kroger, and office furniture supplier Steelcase.
These holdings have created a stable and reliable source of income during the pandemic, and the number of investors who are not interested in that success can probably be counted on one hand. Black Creek said its 26 million square foot operating portfolio is 94.3% leased and its 30 million square foot operating portfolio saw a combined collection rate of 96.5% in October.
However, COVID wasn’t all good news for industrial real estate companies. Prologis Inc. (NYSE: PLD) said in late October that demand is outstripping supply due to the rapid shift towards online retailing. This is likely to lead to a shortage of available storage space in early 2021.
On the other hand, this could be good news for industrial property developers and investors. Less supply means greater demand for those with limited storage space available.
Boston-based STAG Industrial Inc. said in a November 5 press release: “The current economic environment is likely to curb new industrial supply in the near future and accelerate a number of trends that will positively impact industrial demand.”
Developers with projects in the pipeline are in full swing to meet the expected surge in demand early next year. Dream Industrial REIT, headquartered in Toronto, is in the “advanced” phase of planning and approving a 460,000 square foot warehouse in north Las Vegas on 24.5 hectares in which the company has an 80% interest. Construction is expected to start next year.
Both the leasing volume and the rental prices have exceeded Dream Management’s expectations due to the economic conditions in the first weeks of the pandemic.
“We achieve rental prices that outperform our pre-endemic expectations,” said Alexander Sannikov, Chief Operating Officer, during a meeting with investors on November 4th.
Commercial real estate investors are also making acquisitions. Boston-based Plymouth Industrial REIT (NYSE: PLYM) on Tuesday completed the acquisition of 2.1 million feet of industrial warehouse space in Akron and Canton, Ohio, valued at $ 94 million. The portfolio includes 10 buildings that are rented to tenants in the transportation and logistics, healthcare, industrial manufacturing, and food and beverage sectors. Stock market investors know the value of industrial real estate and have steered their money in this direction. Shares in Pacer Financial Inc.’s exchange-traded SCTR fund Benchmark Industrial Real Estate were up 6.1% through Monday. This corresponds to an increase in the Dow Jones Industrial Average of 2.6%.