- March 2, 2018
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Industrial real estate, including warehouses, distribution centers, and manufacturing facilities have become one of the most secure investments in the past few years. This is due to low vacancy rates, and an increasing amount of companies looking to lease industrial space. In Louisiana, one of the main drivers of industrial leasing is the petrochemical industry, including Exxon, Shell, and BASF. Although Louisiana has a great amount of petroleum companies, the national industrial trends are still applicable and will continue to rise in the Southern US.
A recent article by the JLL Commercial Real Estate research group has identified several reasons the industrial market is set to soar in 2018, and added is the main reason that Louisiana will remain strong:
1. New infrastructure aiding upcoming Trade and Transportation development
The White House has yet to release a strategy on repairing and expanding the infrastructure in the US, especially roads, bridges, and ports, but one could expect that 2018 could be the year. President Trump has worked to renegotiate trade agreements and taxes as planned in his campaign, and has promised to repair infrastructure as well. According to JLL, “The urbanization of U.S. cities cannot continue with functionally obsolete roads, bridges and other infrastructure. As upgrades are planned, raw materials will be needed and warehouses to store them.”
2. The Rapid Expansion of E-commerce
We have all heard the horror stories of brick-and-mortar retail finding trouble keeping up with the popularity of internet purchasing. That being said, when retail stores can’t keep up, it means e-commerce will need more distribution in that area. More distribution requires more industrial space. E-commerce, including the massive Amazon, is a rapidly expanding sector of purchasing. “In the third quarter alone [of 2017], nearly 25 percent of total U.S. leasing demand came from e-commerce companies expanding their existing market footprints,” quoted from JLL.
3. Logistics are closing in on employees and customers
People naturally get impatient when it comes to ordering goods online, which has challenged e-commerce retailers such as Amazon to expand on their logistics. The retailer that can ship items the fastest will eventually win the market share of online purchasing, and an excellent way to get items to consumers the fastest is to move the distribution center closer. As e-commerce grows, retailers will be focusing on obtaining warehouse spaces closer to urban cores, and large residential districts, thus allowing an expedited shipping path to customers. Trends will show that e-commerce will soon be leasing smaller warehouses closer to residential areas for this reason.
4. Louisiana: Remaining the petrochemical capital of the US
The oil and gas business can be extremely volatile, but the plants and refineries are here to stay. Refineries such as Exxon Mobil, Shell, BASF, and Placid are growing in size and production. Therefore, vendors that service petroleum refineries must increase in the area to serve them effectively. New developments in petroleum are still choosing to locate to Louisiana, including this Chinese company that is intending to build a $1.12 billion facility in St. James Parish.
If you’re an investor looking for a secure investment in industrial real estate, please contact SVN | Graham, Langlois and Legendre and let us help you discover the options available in South Louisiana.