Current State of the Industrial & Distribution Real Estate Market

This article was featured in New England Real Estate Journal on June 11, 2021.

Overall, the industrial, distribution and logistics real estate market is as popular as ever, and many believe that it will only get more competitive in the near future.

The following is a variety of current insights on the industrial and distribution area:

Data Centers

With the jolt of remote work activities over the past year, and the apparent upcoming changes for more consistent remote work in the future, the importance of seamless internet usage and data storage capabilities is at an all-time high. This creates a demand for industrial property for data center use. Consider highly populated areas for the location of data centers, as those areas have the most people and ultimately the highest usage of “internet” data.

Life Sciences

With increased growth due to company maturation, the need to keep manufacturing in-house, supply chain and development of raw materials moving to the United States, and the general evolution of medicine, there is a much needed boom in life-sciences development, especially in Greater Boston. The traditional life-sciences “hub” is expanded by the day.

Cluster Markets

Markets such as Greater Boston and San Francisco have been seen expansion over recent years, as developers and investors aim to expand on existing core clusters rather than targeting new markets. For example, in Greater Boston, we’ve seen increased development in the life-science area outside of the traditional Cambridge “hub.”

Industrial Conversions

There is continued interest in repurposing mall and retail space for industrial and distribution uses. There are a number of uses to consider, such as industrial, distribution, warehousing, data centers, medical and life-science spaces, casino/gaming sites, churches, office spaces, and even COVID vaccination sites. These uses may be short term or long term. Ultimately, if the property owner is able to generate positive income for its vacant space, whether industrial oriented or otherwise, then it’s worth exploring.

Construction Costs

During the past year’s COVID-19 pandemic, we’ve seen a steady increase in the cost of construction materials, such as steel, lumber, electrical components, and the like. Such increased costs are partly due to limited supply, which in turn can cause delays in completing projects and certainly increasing overall project costs. With the uncertain prospect of when construction supply and demand will level off, it’s important to keep in mind construction deadlines and costs, and any applicable lease provisions and financing covenants.

1031 Exchanges

One popular topic of recent discussion is whether or not 1031 exchanges will be available in the years to come. While no one has a crystal ball as to how the tax code may change in the future, it’s important to contemplate tax planning issues, including, but not limited to, possible 1031 exchanges. Taking advantage of 1031 exchanges while they are still available under the tax code could provide many benefits.

We are here to help answer specific questions and offer advice on your options. Feel free to contact any member of our Real Estate Group, or Industrial Distribution & Logistics attorneys. 

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