Net lease market News
Blackstone bets big on industrial property rebound
In six months, the private equity firm's real estate arm, Blackstone Real Estate Advisors, has amassed a portfolio of 275 industrial properties, spanning about 45 million square feet.
It might more than triple its holdings to about 150 million square feet, according to an industry source with knowledge of the plans, but who is not authorized to talk about them.
These warehouses and distribution facilities -- sometimes as large as 17 U.S. football fields -- sit beside highways, near airports and shipping ports throughout the United States. The hulking concrete shells are stuffed with televisions, shampoo, soft drinks and other goods headed for stores. Tenants include shippers, manufacturers and retailers.
"Industrial real estate in the private market has been cheaper than other property sectors," said Green Street Advisors analyst Steven Frankel. "Industrial last year had not recovered at nearly that same pace as apartments, or hotels or the majority of other sectors. Pricing looked very attractive on a relative basis."
Net Lease Industrial Assets it has been estimated that as much as $97 billion will be invested in the US commercial market by global investors in 2011. DTZ, a British-based real estate services firm, stated this represents a 54% increase from their December 2009 prediction. In short, growing confidence in real estate investment will pull investors off the bench – leaving the industrial sector poised to benefit. However, investors scrambling to find viable and profitable net lease investments are running into a short term problem. There is a lack of both current supply and new industrial construction in the pipeline.
Investors want quality, top rated tenants in the strongest urban markets. These investments are increasingly rare. However, “Mission Critical” net lease industrial assets are available - investors may just need to rethink their criteria. These properties often have existing permitted industrial uses, are located in and around quality commercial markets, and provide goods and services unique to their businesses. The real values of these investments are not only the tenant, or even the property, but the permitted use so critical to the nature of the business. Sellers are willing to sign long-term leases at higher returns than current market rates because these properties are so critical. Increasingly, investors are overlooking traditional analytics and considering these investments. With intelligent investment they can provide a highly profitable return.