Speculative development may be up in many industrial markets around the nation, but it’s still under control, and that’s reason for investors to be positive. That’s the outlook from Duke Realty Chief Investment Officer Nick Anthony, who spoke with GlobeSt.com in advance of his participation in an industrial outlook panel at NAIOP’s I.CON conference.
“The biggest problem with industrial is that supply can get ahead of demand,” Anthony explained, adding that, so far, “supply in most places has stayed under control.” While he doesn’t see the market as conservative, he thinks it is staying more reasonable in the wake of the recent downturn. “The recession is still fresh in everybody’s mind, and I think people are being a little more cautious and banks are being a little more cautious.” He adds: “It isn’t out of control like it was in the last cycle.”
E-commerce is driving industrial demand with major retailers like Amazon and Walmart investing in facilities that are over a million square feet. Duke Realty, Anthony says, is focusing on big-box industrial properties that can accommodate e-commerce and omni-channel customers.
Not surprisingly, Anthony’s investment outlook for 2015 is positive. But he does see one point of concern going forward: “Interest rates are going to go up,” he says, “but we should be okay through the end of the year.” He sees a chance for more volatility toward the end of this year as concern over interest rates heats up, and says that 2016 will depend on whether the supply side remains disciplined.
“That will determine whether the cycle will end in one year or three years,” he warns. “For now, there is pressure on pricing because there is more investor demand than supply, and I think overall, it feels good out there.”
Anthony’s I.CON panel takes place June 11 in Long Beach, California. For more information on the conference, click here.