What Appraisers Should Know About the Increase in Industrial Transactions

With the growing number of industrial real estate transactions, appraisers may become busier than ever.

Since 2019, more and more companies have been doubling down on warehouse and distribution real estate. They are also looking for facilities that can house employee gathering spaces, mother’s rooms, gyms, and other adjunct spaces. Some larger retailers are also looking for industrial spaces that have areas for customers to gather and view products or socialize.

In fact, in the first quarter of 2019, over 109 million square feet of warehouse real estate was being built, and developers were still unable to keep up with demand - luckily, the market has not cooled off yet.

Here is some information on why the sector is booming and some tips on what appraisers can do to keep up with growing demand.

E-Commerce Driving Warehouse Construction

Traditionally, the GDP has reflected demand for industrial property development, but now, e-commerce is the major source for projecting industrial property demand.

It’s common knowledge by now that the past few years have seen a massive uptick in e-commerce, so it is no wonder that some of the biggest online retailers are scouting out and snapping up warehouse spaces faster than developers can put them on the market.

However, not only are e-tailers looking for more and larger warehouse spaces to store merchandise, but they are also looking to have more shipping and distribution centers to keep up with demand for 24-hour shipping options.

Decentralization of Industry

Many industrial and manufacturing sites were mainly located near large city centers like Chicago, Northern New Jersey, and Los Angeles County, but this is changing.

Retailers are moving more fulfillment centers to the middle of the country, far from coastal ports, for last-mile delivery requirements. States like Texas and Washington are seeing more warehouses pop up to accommodate next-day delivery requirements.

Also, many businesses are moving to a hub-and-spoke model, and industrial organizations are no exception. The hub-and-spoke model sees a decentralization of company resources away from urban centers toward smaller satellite centers in suburban and rural areas.

ESG in Industrial Transactions

The Environmental, Social, and Governance (ESG) framework has become more important in the industrial real estate market. It manages and assesses risks and opportunities by taking into account market and non-market factors.

The environmental criteria look at the company's environmental impact and stewardship. 

The social criteria consider how the company manages relationships and creates stakeholder value. 

The governance criteria consider the company’s management philosophies.

Developers have employed the usage of ESG checklists and risk dashboards in the evaluation of environmental risks, which includes storm frequency and other weather hazards.

How Appraisers Will Stay In the Game

Appraisers looking to keep up with rising industrial real estate demands will understand the necessity of shifting to a cloud-based client reporting software that can boast high levels of security.

In a busy market, professionals need a way of tracking assignments and keeping extensive data sets for multiple accounts organized and accessible. Clients are looking to work with appraisers who have the best technology and who are able to share reports that are easy to navigate and that readily convey all of the salient information.

Valcre is an appraisal reporting software that ensures appraisers can easily share reports with clients and keep various accounts organized with a high level of attention to detail. If you are interested in finding out more about how Valcre software can help you stay ahead in a hot market, reach out to us anytime.