Eric Frankel, a senior analyst at Green Street Advisors, participated in a video interview at Nareit’s REITweek: 2018 Investor Conference in New York.
Frankel said the recent flurry of merger and acquisition (M&A) activity in industrial real estate “speaks to amazing institutional investor demand.” He described the agreement for Prologis, Inc. (NYSE: PLD) to acquire DCT Industrial Trust Inc. (NYSE: DCT) as a “bet on scale” and a means to increase operational efficiencies.
Blackstone’s acquisition of Gramercy Property Trust (NYSE: GPT), meanwhile, is a “big bet that asset values are going to keep going up,” according to Frankel.
As for demand going forward, Frankel said he sees “some pretty spectacular tailwinds that are probably going to continue.” E-commerce penetration is relatively low and supply chains are still adjusting, he said. That translates into several years of rebuilding ahead, which is going to equate to more warehouse demand.
Frankel noted that demand for closer-in locations, where land is more expensive to build and rents are much higher, means it’s going to be harder to add supply going forward. “That’s what’s buffeting our rent growth forecast.”
Meanwhile, Frankel said Green Street is focusing on determining where the occupancy cost ratio for industrial real estate may go in the future.