Understanding Trends in Flex Industrial Asset Growth

Why flex industrial asset growth trails behind warehouse sales.

While experts contend that the demand for flex industrial assets is strong, the growth of this market lags behind that of warehouse sales.  In fact, over a ten-year period, warehouse sales have increased by 95% while flex industrial sales are only up 43%.  So, what are the reasons for this slower growth?  Your commercial realty advisors report on the market trends affecting flex industrial assets.

Experts note that the warehouse sector has grown more rapidly over the last few years because e-commerce investors have a preference for these types of industrial properties.  With the e-commerce boom, warehouse sales volume increased by 17% in 2019 alone, this amounts to sales totaling $90.6 billion.

In addition to the influence of e-commerce, many investors feel that flex industrial properties are riskier investments than warehouses.  This is because flex industrial spaces combine office and distribution spaces, with the office component ranging from 10-100% percent of the space.  Because office spaces typically carry a higher risk for investors, many choose to invest in warehouse properties where only about 5-10% of the space is dedicated to office functions.

However, experts contend that demand for flex industrial spaces will soon increase.  This is because flex industrial properties offer the perfect solution for multichannel retailers that need both retail and distribution spaces.  Additionally, unlike warehouses, flex industrial assets usually have sufficient space for customer parking and are located closer to commercial centers where consumers can easily access the space.  In the near future, flex industrial assets are expected to perform particularly well in coastal cities and gateway markets, such as Boston; Oakland, California; and New York’s outer boroughs.

This is what you need to know about the market trends affecting flex industrial sales.  Interested in staying up to date with the latest commercial real estate news?   If so, then contact the experts at California Commercial Realty Advisors, Inc.  Your commercial realty advisors are eager to assist you with all your real estate needs today.

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