Industrial Real Estate Appraisal Trends

National and Regional Industrial Real Estate Appraisal Trends

We are looking to identify trends in national and major nearby metro areas to alert ourselves to anticipated changes in the demand for industrial real estate here in Minnesota.

The new president has been talking about a rebirth in manufacturing in the US, whether or not he can pull it off is another question, but you wold expect some increases in appraisal values if only in anticipation of renewed demand.

In the Chicago Market Brian Forde, a partner in the O’Keefe Ktibs & Hynes law firm notes in a recent REJournals article that…

Since the start of the recovery from the 2008 recession, we have witnessed incredible growth in Chicago’s industrial market.

Since the start of the recovery from the 2008 recession, we have witnessed incredible growth in Chicago’s industrial market.

Since 2013 alone, some of the market measurements that demonstrate that growth, according to Colliers, include:

There are other measurements that demonstrate the strength of the market. Since 2013 more than 210 million square feet of acquisitions greater than $1 million—including owner/occupied facilities—occurred. The average sale price, on a per square foot basis in 2016, was $58, an increase of 32 percent since 2013.

There are other measurements that demonstrate the strength of the market. Since 2013 more than 210 million square feet of acquisitions greater than $1 million—including owner/occupied facilities—occurred. The average sale price, on a per square foot basis in 2016, was $58, an increase of 32 percent since 2013.

With all these metrics pointing to dynamic and sustained growth, the values assigned to industrial property—throughout the metropolitan area—have followed suit. The flipside to this dramatic growth:  real estate property taxes typically follow with similarly substantial increases that mirror lease revenue increases and growth to the bottom line for landlords.

With all these metrics pointing to dynamic and sustained growth, the values assigned to industrial property—throughout the metropolitan area—have followed suit. The flipside to this dramatic growth:  real estate property taxes typically follow with similarly substantial increases that mirror lease revenue increases and growth to the bottom line for landlords.Via rejournals.comVia rejournals.com

Yahoo Finance suggests investment interest for industrial property is moving to smaller markets. Does that include the Twin Cities? or is it more likely to occur in the St Clouds, Duluth’s and Rochester’s of Minnesota?

WASHINGTON, Feb. 23, 2017 /PRNewswire/ — Steered ahead by strengthening demand in smaller markets, the commercial real estate sector should remain on stable ground in 2017 and offer decent returns for investors, according to the latest National Association of Realtors® quarterly commercial real estate forecast.

WASHINGTON, Feb. 23, 2017 /PRNewswire/ — Steered ahead by strengthening demand in smaller markets, the commercial real estate sector should remain on stable ground in 2017 and offer decent returns for investors, according to the latest National Association of Realtors® quarterly commercial real estate forecast.

Lawrence Yun, NAR chief economist, says the U.S. economy is poised for slight improvement in 2017. “Last year was the 11th year in a row of subpar GDP growth, but renewed corporate optimism leading to a focus on investment and a desperately needed boost in residential construction should pave the way for modest expansion this year of around 2.4 percent,” he said. “Steady hiring and low local unemployment levels are finally supporting higher wages and increased spending, which in turn bodes well for sustained demand for all commercial property types.” finance.yahoo.com

While we look to outside sources to inform our understanding of regional and national trends, the reality of appraisal is still local.  At Minnesota Real Estate Appraisal Services, we work to be aware of trends as they affect the marketability of property, but we are more hard nosed than not. We want to do our industrial Real Estate Appraisal with a firm understanding of the local market – recognizing that outside trends will have an effect locally.