Not every warehouse is in demand
The greatest demand is among newly developed Class A industrial buildings that were designed and built for industrial use in the 21st century. This includes larger buildings with greater height and those with automated warehouse features.
Market locations are also an important factor. High-density areas, particularly in the South and Southeast, are seeing the most demand, including major markets in Texas, Las Vegas, Phoenix, Salt Lake City, Denver, and Reno, Nevada. El Paso, Texas, is currently leading expected growth for asking rents, with an estimated 28.5% over the next five years, according to CBRE.
How to participate
Industrial rental rates increased 4.2% in the first quarter of 2021 year over year, and net absorption is the second-highest of any quarter on record. In the meantime, 333.5 million square feet of industrial space is currently in development, with nearly 50% of that preleased. Even foreign dollars are flooding into the U.S. warehouse space.
There is clear demand for industrial real estate today, which is creating incredible opportunities for investors in the space. The high cost of entry into this sector means most investors can participate in the industrial real estate boom by purchasing shares in an industrial real estate investment trust (REIT).
There are several industrial REITs that specialize in warehouse and distribution space and have a diversified portfolio of properties in major metro markets across the country and beyond. Their portfolios are made up of high-quality assets in many of the major markets experiencing high demand, making these companies a great way to gain exposure to this market. But not all REITs are created equal. Each month, Millionacres shares the best industrial REITs to buy right now, which is a great starting point if you're just jumping in.
The unprecedented demand isn't expected to stall anytime soon. It appears to be quite a ways off from current developments exceeding demand, meaning there is long-term growth opportunity here backed by solid trends.