Three Institutional Funds Paying $1.5 Billion for 30.4 Mil. SF of Space
By Mark Heschmeyer
Industrial property deals took center stage this week as not one but three powerhouse private investors — Blackstone Group, DRA Advisors and AEW Capital — locked down deals for large industrial portfolios valued at a total of $1.5 billion. The combined volume of their portfolio deals amounts to more than one-third of the entire dollar volume of industrial sales done year-to-date.
The deals appear to be occuring at an opportune time in the property segment.
“Overall, the U.S. warehouse market has been healing steadily, with vacancy rates receding from 10% at year-end 2010 to 9.2% at the end of 2011,” said Hans Nordby, director of advisory services for CoStar Group. “Given our forecast for continued GDP growth (almost perfectly correlated with warehouse demand growth) and essentially zero supply underway, 2012 should be a solid recovery year for big concrete sheds.”
The recovery is not evenly distributed among all industrial types, but is favoring new and larger properties, the segment of the market that the institutional funds are buying.
“Bigger assets cater more to global trade and retail sales, both bright spots of the recovery since 2009,” PPR’s Nordby added. “Also, corporate profits are high and rents are low right now, so many tenants are inclined to trade up to newer space. On the other hand, smaller assets are often driven by the housing market – Joe the Plumber needs small bay space and definitely doesn’t need 32-ft. clear heights – and the local manufacturing environment.”
The Blackstone deal at $770 million is about twice the size of each DRA Advisors and AEW.
Blackstone Group’s Blackstone Real Estate Partners VII agreed to buy 65 industrial properties totaling 16.6 million square feet from Dexus Property Group of Sydney, Australia. The price comes to about $46/square foot with an average property size of about 250,000 square feet.
Read entire CoStar article here.