The industrial real estate business is red-hot, as intense demand driven by e-commerce and logistics, in general, is driving down warehouse vacancies and driving up prices for such real estate across the country.
Certainly, publicly owned companies are enjoying the ride. The 13 real estate investment trusts (REITs) that Nareit tracks under the "industrial" label had posted an average total return of 21.96% year to date as of Sept. 30 -- and that's while paying out a 2.24% dividend yield. And the CEO of the largest of them, Prologis, says record-low vacancies are helping drive "record increases in market rents and valuations."
But they're not alone. Private money is pouring in too.
Equus Capital Partners bolsters its bet on the industrial segment
A most recent example is Equus Capital Partners. The Philadelphia-based real estate investment managers announced on Oct. 12 that they had just paid $1.15 billion for an industrial portfolio comprising 7.3 million square feet in 342 buildings across 74 business parks in and around Phoenix and Tucson, Arizona. Equus said about 85% of the portfolio is in the Phoenix market, and about 15% is in Tucson.
The company said the properties are predominantly multi-tenant, in-fill, shallow bay facilities in established transportation corridors and population centers.
According to Equus, the seller was anonymous, and the properties were bought through Equus-sponsored value-added funds and a consortium of strategic co-investment partners. The company stated the deal brings the industrial space it currently owns and operates across the country to 25 million square feet, along with land it controls or owns that can support another 12 million feet of new development.
"Equus is focused on expanding this portfolio's holdings in the industrial asset class and has allocated capital available to continue to increase its presence in Phoenix and Tucson," the company announcement said, calling them "some of the top growth markets in the United States."
The Millionacres bottom line
The Equus purchase is a diverse lot that speaks to the breadth and durability of the industrial real estate business. All that space is 98% leased to tenants in 22 different industries, including e-commerce, logistics, manufacturing, and both business-to-business and business-to-consumer providers.
No single tenant represents more than 1.5% of the occupied space, and no single industry accounts for more than 25% of the revenue, Equus said.
The surge may well subside, but the demand won't, and there are plenty of ways to get involved in this promising area of real estate investing.