So, one-third of the way through 2018, how is the industrial market? We have had some big announcements and some significant construction projects. Amazon has announced that Oklahoma City will be the site of a 2.5 million square foot Fulfillment Center. A Fulfillment Center is an Amazon warehouse, in this case, four stories tall, warehousing items which are directly shipped to Amazon customers. A project of this size reinforces the notion that OKC has come of age. In addition to this is the construction of a 1.0 million square foot warehouse addition to the Hobby Lobby campus.
When considering commercial real estate as an investment it is important to understand what each property type has to offer. While all property types have the potential for income, there are other factors that are important to understand. These factors can affect the time, energy and costs needed for a successful investment. With that in mind here are a few pros and cons to industrial real estate as an investment.
Retail is never boring. In the age of click-bait, the headlines would have you believe retail is dying or at least mortally wounded. Over 8,000 stores closed this year, over 300 firms declared bankruptcy. Millennials aren’t spending money on ‘things’; everyone is shopping online, Amazon is unstoppable.
To a large degree, the commercial real estate industry is being shaped by shifting market conditions and changes in consumer behaviors. Some of the most significant consumer behavior changes are directly related to technology advances.
It is easy to view the current low vacancy in the industrial market as a tremendous positive, and in many ways, it reflects general prosperity. But ultra-low vacancy can have both positive and negative side-effects on both the short-term and long-term prospects for the metro area. Low vacancy promotes rent inflation, which is mostly positive when it occurs in moderation. Rent inflation encourages new construction by making property development economically feasible. This, in turn, empowers lending on new construction and is essential to the cycle of cash flow through the economy.