What are the latest news in industrial real estate? How to predict what kind of industrial will be in demand in the future? What are some characteristics of an industrial building that would allow you to have different types of tenants? Chad Griffiths, Partner and Commercial Real Estate Agent at NAI Commercial Real Estate shares his knowledge.

What are some of the latest things happening in the industrial asset class?

What I find so fascinating about industrial real estate is that it's such a wide variety of activities and subcategories of industrial. Ten years ago, most people just grouped industrial as one big asset class, and they'd talk about it at a very high level, and that was it. But now, we should be breaking industrial into more subcategories, because if you look at the warehousing or the logistics side of it, that's gone through a pretty big roller coaster on its own that's independent of other subcategories. And just to give you an example, there are so many warehouses, distribution centers, and logistics facilities that went up so crazy over the last couple of years that in some large markets, they were adding 10- 20 million square feet of warehouse space every year. And now, some of those markets where they overbuilt, there's too much inventory. Their vacancy rate has gone from very low to being problematic in some areas, and it's going to take some time to work through that.

If you look at other subcategories of industrial, manufacturing has still done quite well and it is coming back to North America. Manufacturing and warehousing have been on different paths. There's a new one that has only come up within the last few years, which I think deserves its subcategory, and that is the high-tech industrial which could be EV factories or gigafactories, which is a kind of broad term they use to describe battery factories. Tesla has their gigafactories, that name is kind of extended to other companies as well. You also have semiconductor manufacturing plants, like high-tech labs. Essentially, these aren't manufacturing facilities, if you were to picture Boeing making airplanes, that is traditional manufacturing but these high-tech ones are completely different and there are billions of dollars being invested. TSMC is doing a multi-billion dollar facility in Phoenix, and there's another one going up in Ohio and Columbus, they're popping up everywhere and these are massive facilities. And then the other one that you have is data centers which are growing at a crazy pace.

How do you keep up with that as an industrial investor? How do you look ahead and try to understand what you should be investing in the future?

There are two primary things that I do myself. First, you need to be in a city that has population growth for the foreseeable future. It can't be that there's population growth because there's one major project going on, and then once that project is done, perhaps jobs leave with it. You need to be in a big city where there's optimism that the population growth will continue. Population grows, everybody needs more stuff, they're shopping more, they're doing more online shopping and so warehouses and industrial investment follows population growth.

The second thing is to invest in properties that have multiple uses. If that one tenant that's in there, or multiple tenants that are in there, whether it's at the end of their lease, or they go into bankruptcy, or they get bought out and they just no longer need it, they eventually leave. I want to make sure that when that tenant leaves, that building is suitable and compatible for the next tenant without me having to spend a ton of money retrofitting it.

Chad Griffiths

www.industrialize.com

www.youtube.com/@industrialize