The industrial real estate market continues to undergo significant transformation as companies adjust and expand supply chains to meet customer demands, improve efficiency, and avoid speed-to-market risks. The further adoption of online purchasing by consumers and the explosive growth of e-commerce continues driving more demand for industrial space, from first-mile to last-mile.
As more incremental industrial space is needed to accommodate e-commerce distribution compared to traditional distribution, the industrial real estate market has been and continues to be the beneficiary of this transformation.
With the leading indicators of industrial demand remaining extremely positive, along with the tailwind from e-commerce demand, we expect 2019 to be another strong year for the industrial real estate market. While we are operating in an extended economic and real estate cycle, the ongoing strength in the underlying fundamentals in the industrial market, along with the persistent demand by users seeking well-located, functional distribution space, positions the industry for further growth in 2019.
The overall market seems balanced, with a lack of available industrial space to meet demand, and development, while increasing, continues to be well-received by the market.
Heading into 2019, there are several forces at play that could impact future demand. Uncertainty remains from the impact of the tariffs on Chinese imports and the extent and impact of future interest rate increases. Also, increasing supply chain costs, such as trucking costs from tight capacity, are increasingly driving user decisions on multimodal locations and facility functionality. However, ongoing strength in consumer spending, manufacturing activity and other leading demand drivers of industrial real estate are expected to drive momentum forward.
With a foundation of extremely solid fundamentals, along with strong user demand anticipated to continue evidenced by positive leading indicators, the industrial real estate market is well-positioned for another strong year in 2019.