by Dan Rafter
The officials at Elk Grove Village, Illinois-based Brown Commercial Group are seeing a trend: Industrial users today are growing ever more interested in buying their warehouses and distribution centers. More of them are buying instead of leasing space at industrial facilities.
Trinity Scurto, senior vice president with Brown, said that this trend is only gaining traction as the industrial market as a whole continues to see more activity.
What’s behind the trend? Scurto said that a variety of financial factors makes buying a smart money move for end users today.
“Prices for properties are still at a decent rate, even with the increased activity in the industrial market. At the same time, interest rates are still low,” Scurto said. “A lot of people have regained some of their capital. They are excited to make a move in the real estate market, to put some money in real estate. They want to make a new home for their businesses. They don’t want to just lease on a two- or three-year plan. They’re committing to a location and to growing their businesses in these locations.”
It’s a trend that others are seeing in the industrial market, too. And the buying-over-leasing trend isn’t the only positive for industrial at the halfway point of 2016: Commercial real estate pros say that the industrial market remains one of the strongest commercial sectors today, in the Midwest and across the country.
The best news? These same pros say that they expect activity to only increase in the industrial market throughout 2016 and into 2017.
No crystal ball
Scurto says that though she can’t see into the future, she does have high hopes that the industrial market will continue to see even more sales, leases and new construction in the coming months. She also said that she believes even more end users will elect to buy their own industrial spaces instead of leasing.
“It’d certainly be nice to see sales continue to be so strong,” Scurto said. “I would say that, yes, this is a growing trend and one that will continue. More people are done with the leasing end of the spectrum. They really want to have a more permanent place. They don’t want to be paying someone else to run their businesses. They want to pay themselves to run their business.”
Scurto says that interest rates are playing an important role here. As long as rates stay low, more end users will be encouraged to buy industrial space. And it looks like interest rates aren’t rising in the near future.
It helps, too, that banks are steadily becoming more business-friendly when it comes to loaning money.
“Banks are still being careful about the money they are loaning out, but isn’t nearly as difficult for end users to close smaller deals with the banks today,” Scurto said. “The banks are actually excited. They see hope and promise today.