February 14, 2019
Green Street Advisors 2019 U.S. Outlooks for apartment, industrial, office, and retail sectors reveals rising development obstacles in the industrial sector. Yet, enhancements are envisioned ahead for strip centers in Green Street’s Trade Area Power (TAP) Scores.
Green Street Advisors’ lead analyst Eric Frankel writes in an industrial outlook that new analysis reveals that despite the robust e-commerce-fueled industrial demand, supply has not kept pace. There is significantly greater difficulty in accessing suitable sites for development versus prior periods, leading to a much stronger correlation between markets with rent growth and meaningful regulatory burdens.
Contributing factors to lower supply include cumbersome entitlements, rising land and labor costs, scarce availability of land in population-dense locations, and competition with other property types. As a result, Green Street’s forecasts for industrial are far above the inflation-like rent growth expected for other major sectors.
Meanwhile, strip centers are local businesses, and demographics play a vital part in assessing a property’s long-term growth profile and cap rate. Green Street created Trade Area Power (TAP) Scores to help quantify demand and compare the quality of locations in a singular metric. All things equal, a higher TAP score equates to higher potential demand. The Bay Area markets and D.C. possess the highest TAP Scores in the country.
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