Green Street Analyst Sees Solid Fundamentals in Industrial REIT Sector
06/26/2014 | by Sarah Borchersen-Keto

Eric Frankel, analyst at Green Street Advisors, joined for a video interview during REITWeek 2014: NAREIT’s Investor Forum, held in New York.

Frankel discussed developments in the industrial REIT sector during the first half of the year. Industrial fundamentals have been good for the past few years, said Frankel, noting that the recovery in the industrial sector started relatively slowly when the economy first began to improve about four years ago.

“It’s been pretty smooth sailing,” he observed.

An uptick in absorption subsequently occurred due to the increase in e-commerce-related activity, Frankel said. Larger, well-capitalized corporations also put greater focus on their supply chain reconfiguration, according to Frankel.

“However, recently, you’ve seen smaller businesses start to participate in the recovery and you’ve seen a little bit better rent growth and a little bit better occupancy growth among all the REITs in the market in general,” he said.

On the capital side of the industrial REIT sector, Frankel pointed out that property values and capitalization rates are “at all-time highs and lows, respectively.”

Frankel was also asked to comment on trends that he will be monitoring in the capital markets for the remainder of the year.

“There are a lot of portfolios on the market now. It will be really interesting to see who’s going to pick them up. There could be some REIT-level interest, but there are also a lot of properties of mixed quality, and it will be interesting to see if institutional capital tries to pick them up,” Frankel said.

Meanwhile, Frankel discussed unexpected developments that could influence the industrial sector going forward.

“Supply is always an issue, and it can come on really quickly because construction cycles are relatively short,” he said. “So, you always have to be cognizant of the fact that if demand is really good, then supply can follow on short order. That’s what we’ll probably be watching for the next couple of years.”