Business Guidance / Featured

Industrial Space: A Hot Sector for Commercial Real Estate

Commercial real estate (CRE) saw a fluctuation in demand in 2020 and 2021 due to the COVID pandemic and its economic impact. However, one sector we’ve seen boom due to the shift towards digital and contactless commerce is industrial space and, more specifically, warehousing and cold storage. But why are these two areas doing so well and why do we expect them continuing to do well into 2022?

Warehousing has done particularly well over the past year and a half due to the restrictions around in-person retail implemented to curb the pandemic and the associated rise in digital sales and shopping. Research shows that this sharp rise in e-commerce could lead to an additional demand for more than 400 million square feet in industrial warehousing and storage space. The need for increased warehouse spaces for companies like Amazon and other large, online retailers has benefited the Lehigh Valley, in particular, due to its proximity to the I-95 corridor, a prime location for warehouse developers.

In the third quarter of 2021, we saw a 10% rise in business compared to the previous quarter and we’ve seen a 30% increase year-over-year thanks to warehousing projects. We expect this trend to continue in 2022. We’ve worked with developers to meet the high demand for warehousing space. This has been both via new construction and conversion projects which takes vacant spaces like malls and converts them into fulfillment centers.

Additionally, we have seen a sharp rise in the need for cold storage facilities. A spring 2020 report found that grocers saw a 3-4 times digital sales increase during the spring (and early days of the coronavirus pandemic), a trend that has continued as people make a longer-term shift towards online grocery shopping. With many families choosing to do their grocery shopping online to avoid crowds and online retailers partnering with on-the-ground grocery stores making it easier for shoppers to get same-day delivery of groceries, cold storage has become a crucial component of warehousing infrastructure.

More recently, the rollout of a coronavirus vaccine that requires specialized cold storage has fueled a rush towards facilities that can maintain extremely cold temperatures. We are seeing these facilities pop up in areas just outside of Philadelphia and other major cities. With the push to provide vaccines and boosters to millions of Americans and the need current vaccines have for specialized cold storage, this has the potential to continue to be a growing area of the industrial warehousing and storage market.

Industrials is a key area of commercial real estate that has done relatively well the past 18 months and is projected to continue doing well, especially if the economic focus remains in the digital landscape. We work closely with developers to meet this demand and finance their projects. Our lenders at Univest are here to help builders and investors navigate a fast-changing market. Contact us to learn how we can help you on your next project.

 

Univest Bank and Trust Co. is Member FDIC, SBA Preferred and an Equal Opportunity Lender.