Based on bi-monthly meetings and industry reports, we have found the general consensus for the 2018-19 industrial real estate market is positive. New development in the Chicago 6 county market has been consistent at around 20,000,000 square feet annually over the past three years with normal attrition at around 12,000,000 square feet. Rents, sales prices, construction cost and land entitlements are projected to increase at a 15% to 35% rate; depending on the product and location. Basic reasons for these increases include: increased cost of material and labor and increased potential operational improvement expenses. Adaptations of facilities to accommodate increased concerns for employee recruiting and retention along with last mile service are requiring many firms to increase their investments in their facilities to accommodate a rapidly changing market.
E-Commerce is having a major impact on speculative industrial facilities. Although varying in use, standard production and general warehouse designs are also changing. Specifications for larger industrial facilities are incorporating 40’ Clear and higher ceilings, major increases in power, larger parking and truck storage areas, upgrades in levelator dock hydraulics and screens, improved LED lighting, cool roofs (reflecting sunlight rather than absorbing it) solar panels, larger higher quality offices and more. Designs are being revised for the future to add solar panel additions and for the adaptation of driverless cars and trucks. There is uncertainty as to how the automotive industry and drones will affect our industrial future!
Industrial real estate is becoming more sophisticated as many of our older facilities will only be useful for land value as they are razed. Building design and expense is adapting to the U.S. future and companies are adapting to the importance of what has been a commodity but may be our most valuable asset. Skilled Labor and Labor availability for training or retraining are the major factors being currently assessed for U.S. Corporate expansion and Development Speculation. Small business plans should and will ultimately utilize these factors for their future and any potential expansion or consolidations. Many of these upgrades may not be necessary for small and mid-size firms but we believe Combined Commercial Realty can help with any future planning which should include a real estate exit strategy.