Which Type of Commercial Property is Doing Well With Covid-19?
It’s not a surprise that every industry has been impacted by the economic downturn from Covid-19, however, some commercial real estate properties are thriving. Of the various types of commercial real estate, industrial properties (warehouses, fulfillment centers) have been in a good position.
The Pension Real Estate Association (PREA) estimates that by 2024, returns on industrial properties could be more lucrative than other investments. Compared to apartments, the investment is projected to be 1.6% higher, office space 2.8%, and retail yielding 5.1% higher return. PwC reports that industrial investments will be expected to outperform any other real estate asset through at least next year. Compared to last year, industrial property values are 7.4% higher.
Why are Industrial Spaces Booming?
The pandemic brought a rise in e-commerce as many feared going out to shop. Also, Covid-related supply chain issues made businesses rethink their inventory shortages, which led to a higher demand for larger storage space. Prologis research estimates a whopping 400million square foot increase in demand for industrials spaces over the next few years.
But the rise of industrial spaces isn’t only due to the supply chain challenges Covid presented. As Reuter’s reports, “Already, before this crisis warehousing was seeing a considerable period of sustained growth, as both mega-tenants, such as Amazon, as well as smaller businesses, sought space closer to consumers and growth markets. This has led to an excellent run of new builds and take-up of industrial space over the last five years.”