As Chair of the Sperry Van Ness Industrial Product Council, I am pleased to forecast that we are poised to move forward into 2013 in a far more positive and optimistic environment than what has been the norm for the past four years.
Industrial market has stabilized
At the core of my positive outlook is my belief that the market has stabilized. For the past four years, the industrial market has been in a downward slide. We saw many manufacturers and industrial employers in the automotive, recreational boating, and residential-construction related industries collapse. Industries have pulled back, many shrinking and many going out of business.
Now it seems that industries that were shrinking have stabilized, and many are looking forward with plans for expansion. Prices of existing industrial buildings are at a seven-year low interest rates continue to be low, which puts the industrial user is in a very strong position to move forward.
Industrial users are facing decisions such as whether to enlarge existing space, relocate to available empty space, or build new. In most geographical areas, existing facilities are priced below replacement costs, making them more attractive and more cost-effective than building a new facility. However, there has been no new construction in the last four or five years, so supply in some markets may be tightening up. At this point I have not yet begun to see an increase in the price of existing industrial facilities, but that will change as the market improves.
The SVN Industrial Advisor will find that working with Business Development / Economic Development professionals at both the local and state level will be an important resource to develop. These professionals are in a very unique position to be able to encourage existing industrial businesses in their expansion goals. They have access to financial and other incentives to help the industrial user. We are seeing some growth in industrial sectors related to health care, pharmaceuticals, food processing and light manufacturing. The automotive and related industry has seen not only stabilization, but significant turnaround growth.
Forecast for 2013
Looking forward I think the first six months of 2013 will see modest improvement, and I hope that by the second half of the year we will really notice increased activity and perhaps increased prices in the market. While resurgence is not evident in many markets at this point, moderate improvement should begin to be seen in the latter half of the year. There will be many opportunities as the economy begins to turn around. SVN Advisors in secondary and tertiary markets, who know their inventory, and are working with the Development Professionals working in their area, are well positioned to help their industrial clients.
Henry Hanna, CCIM, SIOR
Product Council Chair for Industrial Properties
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