Investing in U.S. real estate is something that often appeals to foreign players. Now, Mubadala Investment Co., an Abu Dhabi-based sovereign wealth fund, has formed a joint venture with Crow Holdings, a privately owned real estate investment and development firm based out of Dallas, to develop $1 billion of Class A industrial U.S. properties. Mubadala has $243 billion in assets to play around with.
Details of the joint venture have been limited thus far, and it's unclear as to which metro areas the pair will be targeting. But this news should serve as a wake-up call for investors that now's a great time to dabble in the industrial space.
Why industrial REITs could soar in the near term
The coronavirus pandemic changed consumer behaviors, forcing a massive shift away from brick and mortar retailers to digital shopping instead. Now, many consumers simply point and click their way to purchases and wait for them to arrive at their doorstep.
And it's not just apparel, books, games, and household items that are increasingly being purchased online. Online grocery orders have soared during the pandemic, and now that consumers are used to the ease and convenience of having supermarket staples delivered, that trend is likely to continue.
All of this means that in the coming years, there should be huge demand for industrial space. In fact, a number of well-known retailers, like Gap, are investing more money in warehouses and fulfillment centers in an effort to grow their online business. Meanwhile, Amazon is currently on the hunt for 100 new facilities to add to its lineup.
All told, retailers need more warehousing space to keep up with ongoing and incoming demand. And so now's a really good time to consider investing in industrial real estate.
Furthermore, supply-chain issues overseas are causing some retailers to rethink their approach to product distribution. Some companies may seek to source products more locally in an effort to avoid the shipping bottlenecks some fear will upend the 2021 holiday season. That, too, will fuel the need for more industrial space domestically.
All told, industrial REITs (real estate investment trusts), which largely consist of warehouses and expansive sorting and fulfillment facilities, are in a great position to take off in the coming years. If anything, right now, there's more demand than there is available supply for these spaces -- and that paves the way for higher rental rates.
But even once more industrial facilities are built out, the demand for that space is apt to remain high. And so industrial REITs should constitute a solid investment for many years to come.
Not only is the demand for industrial space likely to stay strong, but in the coming years, retailers may favor those facilities that are set up with built-in automation. It'll be interesting to see how much technology is incorporated into the plans Mubadala and Crow embark on. The team is clearly looking to develop higher-end facilities, so it wouldn't be surprising to see cutting-edge robotics incorporated into their plans.