CBRE research addresses drivers for increased sales of industrial facilities

Research issued earlier this month by Dallas-based industrial real estate firm CBRE highlighted various reasons related to the factors currently driving industrial facility sales.

The research, entitled, “More Occupiers Opting to Buy Industrial Facilities,” pointed to the following points as keys resulting in the increasing sales of industrial facilities, including:

• Increase in property sales: Industrial occupier property sales increased by 32% last year, with a 5% rise in the average sales price to $152.42 per sq. ft;
• Long-term benefits: Occupiers are opting to buy rather than rent due to long-term cost savings, tax deductions, and the ability to customize properties to meet their unique needs;
• Market trends: Over half of the acquisitions were for buildings constructed before 1980, indicating a trend towards purchasing older facilities; and
• Upcoming opportunities: With nearly 21,300 industrial leases expiring in the next 36 months, there will be more opportunities for occupiers to buy facilities

Looking at the 2,054 industrial property sales in 2024, CBRE found that more than more than half of them were for buildings constructed before 1980, at 1,230, and 114 for buildings constructed between 2020-2024, 389 for buildings constructed 2000-2019, and 861 for buildings constructed between 1980-1999.

Leading the way geographically, for 2024 industrial property occupier acquisitions was Chicago, with 188 transactions, for an average price per sq. ft. of $93.88, with an average year built in 1977. Rounding out the top three were Houston (143 transactions, for an average price per sq. ft. of $113.79, with an average year built in 1993, and Los Angeles (123 transactions, for an average price per sq. ft. of $287.79, with an average year built in 1970).

James Breeze, Vice President, Global Industrial and Retail Research at CBRE, told LM that an increasing number of industrial occupiers are looking to buy buildings to protect against future rent growth and have more control over building functions.

The tenants that have been interested in purchasing are those that occupy class B or lower space, typically built prior to 1990.

“These tenants usually operate functions that don’t require modern building amenities ( i.e. small to mid-size companies providing goods or a service to the local population, many of them having a light manufacturing component),” he said. “We have seen an increase in vacancy in this type of space over the past year as more occupiers are looking to consolidate out of older space into newer buildings. Investors who own these buildings are more willing to sell rather than invest capital in renovations. In summary, there is a growing buyer class and a larger investor base willing to sell.

When asked if this this rate of growth is expected to continue into 2025 or if the uncertain economic outlook could impact that, Breeze said that there could be a slowdown in growth as occupiers await consumer responses and possible price increases for certain goods.

“On the flip side, many buyers of older product have some sort of light manufacturing component,” he said. “The increased price of internationally sourced goods could benefit these companies by providing them with the capital needed for purchases. We will have more clarity on this over the next few quarters.

While CBRE did not break this research out into industry verticals, Breeze said that a scan of the buyers shows that most are small-to- mid-size companies providing goods or services to the local population, many of which have a light manufacturing component.