Industrial property sales volumes plunged in past 2 months, report says

The price increases, especially coming off a very strong fall 2021 period for industrial real estate, comes as capital has become scarcer and more expensive throughout 2022 in the wake of rising interest rates. The increases could be a legacy of deals that were already in the pipeline before the market slowed in response to higher rates, said Jack Rosenberg, national director, logistics and transportation, for Colliers’ industrial advisory group.

Aaron Jodka, research director, U.S. Capital Markets at Colliers (NASDAQ: CIGI), said the sales data “lags what we have been feeling on the ground for a number of months,” namely that transaction activity has slowed markedly in response to higher capital costs.

Industrial volumes had a bump in October due to the closing of Prologis Inc.’s (NYSE: PLD) $26 billion acquisition of Duke Realty, Jodka said. However, it wasn’t enough to move the sales needle above October 2021 activity, he added.

Colliers expects monthly volume comparisons to remain negative through the first quarter of 2023. Unlike other real estate asset classes, however, industrial demand remains strong, with occupancies at or near record low levels and rents at all-time highs in virtually every market. The drop-off in investment activity is due entirely to higher borrowing costs, Jodka said.

“Typically, liquidity subsides when fundamentals are weakening, which is not the case [with industrial property] today,” he said.

Indeed, the industrial sector is faring better than the four other asset classes — hotel, office, retail and multifamily. In October, those four classes reported sales volume declines between 28% and 64%. Yet all four also reported year-over-year pricing changes.

RCA’s platform is used by real estate investors to identify possible deals and by tenant brokers like Colliers to get a broad distribution of their available properties. Rosenberg said that RCA is considered the “gold standard” of real estate transaction platforms and that its data is an accurate representation of the market as a whole.