The industrial sector is the least impacted.

Leonardo is a California-raised professional who currently resides in Irvine, California and serves as an advisor for SVN Vanguard Commercial Real Estate. He has a keen interest in SoCal living and boasts extensive experience and expertise in the commercial real estate (CRE) industry, with a focus on property management, sales, and investments. He is particularly adept at dealing with distressed multi-family properties, leasing retail spaces, and providing full-service brokerage.
Leonardo’s skills and experience have led him to successfully manage and enhance the value of a complex portfolio of both residential and commercial properties.

As a multilingual individual, Leonardo has leveraged his language skills to expand his career opportunities beyond the United States. He has successfully worked internationally, selling beach investment properties in Tulum, Mexico, and collaborating with land developers to purchase land, promote pre-sales of developments, and oversee property management.

Prior to his current role, Leonardo managed a portfolio of real estate-owned (REO) properties in California for a major nationwide lender. In this capacity, he was responsible for bringing assets up to city code, dealing with REAP, tenant management, rent collection monitoring, occupancy and property inspections, lease negotiation and enforcement, rent control, and city code violation management. His efforts earned him the Bronze Award of Sales from the Downey Association of Realtors on three separate occasions.

Specialties

1. INTEREST RATE OUTLOOK

• Despite the Federal Reserve’s decision to hold rates constant at their June meeting, current market forecasts project an 81.8% chance that the FOMC will move forward with a 25-basis point hike in July, according to the Chicago Mercantile Exchange’s Fed Watch Tool.
• In June, officials placed their year-plus hiking cycle on pause in an effort to evaluate the success of their tightening effort thus far. Earlier in the month, national employment data registered stronger than expected, while annualized inflation continued to trend downwards.
• With recession concerns still pertinent, the Fed opted to pause and digest incoming data. At the same time, some officials have signaled a preference for further rate hikes to anchor longer-term inflation expectations. Notwithstanding recent deceleration, Real PCE, the Fed’s preferred inflation gauge, remains
  well above the central bank’s 2.0% target.
• In recent days, Fed Chair Jerome Powell indicated that “there’s more restriction coming,” acknowledging that despite the committee’s decision to pause last month, he and other members “expect the moderate pace of interest rate decisions to continue.” While not outright saying that they expect rate hikes to continue, the statement signals the Fed won’t hesitate to move forward with a hike if the data warrants it.

2. HOME PRICES

• Home prices fell annually for the first time since April 2012, declining 1.7% year-over-year in April, according to the S&P/Core Logic Case-Shiller Home Price Index.
• Market forecasts for the Case-Shiller projected a 2.6% annual decline during the month. Despite the steepest annual drop in over a decade, monthly data suggest that home value declines may have hit a cyclical nadir in recent months, as home prices were up 1.27% from March. Between June 2022 and January 2023, home prices fell in each month before turning positive again in February.
• Seattle and San Francisco continue to experience deep year-over-year declines, while several other markets, including Miami, Chicago, Atlanta, and Charlotte, are experiencing modest single-digit growth.
• The southeast continues to be the strongest region for home price growth, averaging 3.6% year-overyear. The west remains the weakest, falling -6.9% over the past 12 months.

3. INDEPENDENT LANDLORD RENTAL PERFORMANCE

• The on-time payment rate in independently operated rental units declined for the third consecutive month in June, falling to 82.5%. Despite the recent retreat in on-time rates, compared to one year ago, the on-time payment rate remains up by 118 basis points compared to a year earlier.
• These data underscore how the rental housing sector has fended off widespread distress while headwinds mount elsewhere in the market. According to MSCI Real Capital Analytics, through May 2023, apartment prices are down 13.8% from their 2022 peak. Additionally, borrowing terms remain stringent as banking sector volatility and high-interest rates impact the attainability and feasibility of debt financing.
• Nevertheless, the continued performance of rental units amid a still resilient labor market is allowing independent operating landlords to withstand the economic malaise. As units maintain their monthly rental payments, the cash flow ecosystem between tenants, operators, and lenders stays intact.
• The June 2023 forecast full payment rate is 91.6% — just 44 bps below its post-covid peak.

4. REGULATORS SOUND THE ALARM ON CRE

• In recent weeks, US regulators have asked major lenders to work with credit-worthy borrowers facing stress in the commercial real estate market.
• The statement arrived from the Federal Reserve, the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency, and the National Credit Union Administration, who urged them to work “prudently and constructively” with good clients.
• The outreach comes amid rising concerns about the stability of commercial real estate as lending standards tighten and property values absorb a testing demand outlook.

5. SELLOFF IN CRE STOCKS MAY PRESENT OPPORTUNITIES

• Portfolio manager Jeffrey Kolitch of Baron Funds, a publicly traded fund that manages close to $1.5 in real estate assets, recently expressed his belief that recent stock selloffs in the sector present investors a “gift,” proving some an opportunity to acquire high-quality companies at “attractive” prices.
• At a recent talk, Koltich expressed his disagreement that we are on the cusp of a CRE crisis and his belief that setup for real estate in public markets is bullish. He emphasized the flurry of headwinds that the industry has faced in recent years, including the pandemic and generational shifts in consumer preferences, and how the industry has proven to remain innovative and efficient in the face of them.
• Further, he believes the rising fears surrounding the industry have caused stocks in the sector to fall steeper relative to the broader market, presenting attractive pricing to looking for upside in the public markets.

6. MEASURING UP OFFICE DEVALUATIONS

• A recent CRE Moody’s Analytics analysis explored some of the worst-case scenarios for the office sector by setting out to answer the question: what does it take to see a peak-to-trough Office value decline of 40%?
• The analysis notes that a 40% peak-to-trough decline would require current levels of distress to worsen and sustain. Between Q1 2022 and Q1 2023, office property values have declined nationally by an average of 12.7%. Prices would need to fall by another 31.3% from current levels to reach the 40% aggregate devaluation threshold.
• According to the authors’ calculations, to see office valuations drop by another 31.3% nationally, it would require that occupancy rates fall by an average of 3.8% from current levels and an NOI drop-off of 24.5% from current levels.
• The analysis notes that while the above scenario will likely play out in some properties, “the chances we see broad office declines at this level is on the tail end of the distribution of possibilities, as opposed to the expected case.”

7. RENTS DECLINE

• According to Realtor, May rents on 0–2-bedroom apartments fell -0.5% year-over-year through May, marking the first decline since they began tracking the segment in 2020, signaling a potential shift in the market cycle.
• Smaller units saw rents increase over the year, with studio apartments up 2.0% in the past 12 months and one bedroom up by 0.4%. The retreat in rents was driven by two-bedroom units, which have declined by 0.5% year-over-year.
• The median asking rent in the 50 largest US metros rose by $3 from April but is down $38 from its July 2022 peak.
• Rents in the West are falling steeply, down -3.0% year-over-year, while markets in the South have seen an average decline of -0.7%. Rents in the Midwest continue to climb but are slowing, rising 4.5% in the past 12 months.

8. THE FIVE TIGHTEST RENTAL MARKETS IN THE US

• According to recent research from Chandan Economics and Arbor Realty Trust, the five tightest rental housing markets in the US today are Cape Coral, Louisville, Boston, Knoxville, and Worcester. The scoring matrix relied on two factors: rent growth and occupancy.
• Cape Coral, FL, which had the country’s most intense rent growth pressures through April, has seen its profile rise as a retiree destination. Meanwhile, Louisville and Knoxville have gained in recent years as their combinations of urbanized downtowns and housing affordability have attracted new residents.
• In Massachusetts, Boston’s market tightness appears primarily due to supply-side factors, including the market response to the municipal government’s push to implement rent control. At the same time, Worcester is gaining from demand-side factors as its downtown revival attracts residents away from Boston.

9. MIXED USE MALLS

• Some developers are turning to a mixed-use approach to salvage the value of struggling big-box retail space, specifically by combining a variety of smaller retail tenants with residential properties mixed in.
• For instance, many investors owning property at former Sears locations are now converting them into experimental “live, work, and play” environments, reflecting a trend to revitalize malls and adapt to changing consumer preferences.
• Sears, a retailer with a formerly sizeable national footprint, has just 12 department stores remaining nationwide following a Chapter 11 bankruptcy filing and the effects of the pandemic’s “retail apocalypse.” During the proliferation of malls in the 1960s, Sears positioned its auto center adjacent to mall parking lots where their department stores were typically located.
• As a result, properties that formerly housed these connected retail sites are in a unique position to accommodate such a mixed-use approach and may serve as a template for investors looking to implement such a strategy. The new strategy focuses on residential, retail, and other amenities.

10. NET LEASE INVESTING

• For net lease investors, the recent pause in rate-hikes may signal an easing of cap rate expansion, but the likelihood of additional rate increases in the coming months means that investors should brace for further cap rate increases before normalizing in 2024.
• Even if the Fed’s tightening cycle halts and rates remain neutral for the foreseeable future, lending conditions and risk appetites will likely remain restrictive in the near term.
• Those with cash-on-hand, who can secure long-term lease deals with creditworthy tenants—alongside the proper due diligence processes to execute those deals—should be able to proceed with investment plans despite the lending pullback.
• However, smaller deals will have an advantage in this environment, as larger players with more significant targets may be forced to stay in wait-and-see mode until demand unsticks.

SUMMARY OF SOURCES

• (1) https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html
• (2) https://bit.ly/44unGBr
• (3) https://www.chandan.com/independent-landlord-rental-performance-report
• (4) https://www.bloomberg.com/news/articles/2023-06-29/us-asks-lenders-to-help-firms-withcommercial-real-estate-stress?srnd=markets-vp#xj4y7vzkg
• (5) https://www.barrons.com/articles/real-estate-stocks-selloff-ac3cb792
• (6) https://cre.moodysanalytics.com/insights/cre-news/capital-market-quick-take-what-does-it-taketo-see-a-peak-to-trough-office-value-decline-of-40/
• (7) https://www.realtor.com/research/may-2023-rent/
• (8) https://arbor.com/blog/the-top-five-tightest-rental-markets-in-the-u-s/
• (9) https://www.globest.com/2023/06/29/vacant-sears-stores-find-new-life-as-housing-in-mixeduse-malls/
• (10) https://www.globest.com/2023/06/29/what-does-the-feds-breather-mean-for-net-leaseinvestors/

In addition, a lot of asset types’ property values have increased.

We are ready to assist investors with Santa Ana commercial properties. For questions about Commercial Property Management, contact your Orange County commercial real estate advisors at SVN Vanguard.

SVN | VANGUARD is pleased to announce the addition of Eric Lambiase to our SVN Southern California team. Lambiase brings over 25 years of successful transaction experience representing both regional and national tenants and landlords. As Senior Vice President at SVN, Eric will assist in leading our Retail effort in both landlord and tenant representation, said Managing Director, Cameron Irons.

Edward Park has been a Business Opportunity & Commercial Property Broker for 33 yrs. He is an experienced broker in small to medium size businesses and properties, beginning in Jan 1990.

Mr. Park was on the Board member of OCKCA & OCKFA for many years helping to serve Korean American Communities in Orange County.
Mr. Park graduated from Chung Ang University, Seoul, Korea with a major in Business Administration in 1977.
In addition; Mr. Park successfully completed the LA MBA Course from Hankuk University of Foreign Studies in 2011.
He also completed the course of Recognition of Entrepreneurial Accomplishment from USC (WLA Minority Business Development Center) in 2013.
Additionally, Mr. Park was Owner / Manager VR Business Brokers (LA Branch) for 8 years.

In his spare time, Mr. Park is active in mountain climbing as well as reading books.

1. FED MEETING MINUTES

• Minutes from the FOMC’s May 2-3 policy meeting showed that central bank policymakers were split on the decision to continue raising interest rates or pause increases during its most recent vote.
• Ultimately, the decision to raise rates by 25 basis points in May was unanimous. However, the minutes signal that officials are taking an increasingly balanced approach to fighting inflation as their tightening efforts gradually show their impact on the US economy.
• While some officials have signaled openness to a pause, most have also reiterated that the committee is not “done” in its fight against inflation, and their decisions remain data dependent. Other officials remain aggressive in stamping out recent price pressures, believing that rate hikes should continue to anchor
  future inflation expectations.
• According to the Chicago Mercantile Exchange’s Fed Watch Tool, there is a 66% chance that the Fed will pause rate hikes at its June policy meeting.

2. DEBT CEILING NEGOTIATIONS

• President Biden and House Republicans appear to be inching closer to a bipartisan deal to avert a looming debt-ceiling limit, according to senior aides from the White House and Speaker Kevin McCarthy.
• Talks have intensified in recent days as a projected early-June fiscal cliff approaches, and a deal that satisfies both sides of the aisle remains elusive.
• The Treasury Department estimates that the US could run out of money as soon as June 1st, which economists warn could potentially upend the global financial system and send the economy into recession.
• On May 24th, Fitch, a rating agency, placed the US Government’s “AAA” credit rating on negative watch, signaling that partisan disputes have threatened the standing of US creditworthiness.
• House Republicans are seeking significant cuts to discretionary spending before agreeing to raise the debt limit. The White House and Congressional Democrats initially looked to pass a clean increase without cuts but recently agreed to freeze spending at current levels for the following year.
• It is expected that both sides will need to compromise to pass legislation through the Republican-controlled House and Democrat-controlled Senate.

3. HOW A US DEFAULT COULD IMPACT CRE

• If no deal is reached in Washington and the US defaults on its debt, the result will have far-reaching effects on parts of the global economy, with commercial real estate among them.
• US Treasury values would fall, creating upward pressure on mortgage yields and other market interest rates. According to the Mortgage Bankers Association, this process has already begun to play out simply based on the growing possibility of default. In recent days, default fears appear to have pushed mortgage rates up and resulted in a decline in purchase applications.
• The recent banking crisis would also likely intensify, as recent distress was mainly due to an oversaturation of treasuries on the bank’s balance sheet that was not hedged for the risk of rising interest rates. If a default were to cause even further upward pressure on rates, banks that have avoided issues during the Fed’s rate hikes might get thrust into distressed positions. This could significantly dry up financing for CRE projects.
• A debt ceiling crisis would immediately delay deals, and prices would initially fall in the wake of a default. However, opportunistic buyers may swoop in during this time, as seen during the early days of the pandemic, and create some market demand.

4. BANK SHARE OF CRE DEBT

• As small and mid-sized banks face new challenges, there have been increased concerns around their foothold in commercial real estate debt markets. However, a study by Moody’s Analytics suggests that while smaller banks have grown in market-share recently, they are far below the “65-70%” number thrown
  around by some recent doomsday-like analysis.
• According to Moody’s estimates, banks account for 38.6% of CRE lending, while mid-sized regional banks, of which there are 135 nationwide, account for just 13.8% of CRE debt.
• The nation’s top-25 largest banks hold 12.1% of CRE debt, while the 829 community banks hold 9.6% of CRE Debt.
• As noted in the Fed’s most recent Senior Loan Officer Opinion Survey (SLOOS), most lenders tightened credit standards during the first quarter of 2023, which could reduce some financing options for the CRE market. However, Moody’s notes the CRE debt market is large and diverse, and several non-bank lenders such as insurance companies, mortgage REITs, and others could step in to fill the gap.

5. Q1 GDP SECOND ESTIMATE

• The Q1 US GDP estimate was revised from a 1.1% annualized rate to 1.3%, according to the latest data from the Bureau of Economic Analysis.
• The upward revision reflected a smaller decrease in private inventory investment than previously estimated, while consumer spending accelerated more than expected (3.8% compared to the previous estimate of 3.7%). The upward revision in spending is notable given rising financing costs and inflation that, while cooling, remains high by historical standards.
• Non-residential fixed investment was also revised upward to 1.4% annualized versus a previously estimated 0.7%, while government spending was revised up to 5.2% annualized compared to the 4.7% previously estimated. Residential fixed investment shrank more than previously estimated.
• Despite the upward revision, Q1 2023 remains the slowest quarter for growth since Q2 2022, though a US recession appears to have so far been avoided.

6. NEW AND EXISTING HOME SALES

• Sales of new single-family houses rose to a seasonally adjusted annual rate of 683,000 in April, according to the Census Bureau, 4.1% above March’s pace and 11.8% above the April 2022 level. For sale inventory currently has 7.6 months of supply.
• The median sales price for a new home sold in April was $402,800.
• Meanwhile, according to the National Association of Realtors (NAR), existing-home sales declined by 3.4% in April to a seasonally adjusted annual rate of 4.28 million. Sales were down 23.2% from one year ago.
• The median existing-home sales price fell 1.7% in April to $388,800.

7. EMERGING TRENDS IN DINING

• At the recent ICSC conference in Las Vegas, dining experts convened for a session to discuss emerging trends in the food and beverage industry, including the evolution of consumer behavior and its impact on retail real estate.
• Speaking about plans to expand their “Dave’s Hot Chicken” brand, SVP of Real Estate Dannon Shiff explained that the ideal space for his brand includes daily necessities, possesses high visibility, has ample parking facilities, and presents a significant signage opportunity.
• Patrick Chamberlain of Hart House spoke about the need for location relative to local trade areas, where travel guests or employees seek lunch and dinner options. Their brand is eyeing both urban and suburban locations for expansion, noting that the remote work shift has led to reevaluations of local trade hot spots.

8. CONSUMER SENTIMENT

• US consumer sentiment fell to a six-month low of 57.7 in May 2023, down from a reading of 63.5 in April, according to data from the University of Michigan.
• Survey forecasters had projected a reading of 63 in May, but a recent deterioration in expectations about the economy’s future trajectory led to steeper declines.
• The expectations sub-index fell to 53.4 in May from 60.5 during the month prior. The current economic conditions index fell from 68.2 to 64.5.
• Year-ahead inflation expectations fell slightly to 4.5% from 4.6% in April.
• According to survey director Joanne Hsu, recent negative news stories, including the debt ceiling standoff and banking crisis, may have led to the fall in sentiment in recent weeks.

9. PENDING HOME SALES

• Pending home sales, meanwhile, remain steady. According to the NAR, pending home sales remained unchanged from March at an index reading of 78.9 in April.
• Pending transactions remain down by 20.3% year-over-year. According to NAR Chief Economist Lawrence Yun, limited inventory has prevented some buying interests from being met, while affordability challenges “continue to hold back singings.”
• The highest activity level occurred in the South and Midwest regions, respectively. The northeast region saw the lowest activity levels, followed by the West region.

10. HOUSING PERMITS AND STARTS

• Building permits fell 1.5% from March to April, registering a seasonally adjusted annual rate of 1.41 million homes in April, down from 1.43 in March, according to the Census Bureau. Permits are down 21.1% year over- year.
• Housing starts rose 2.2% month-over-month in April to 1.40 million— up from 1.37 million. However, starts remain 22.3% below their April 2022 level of 1.80 million.
• Housing completions fell 10.4% in April to 1.37 million, down from 1.53 million. However, completions are 1.1% above their April 2022 level of 1.36 million.

SUMMARY OF SOURCES

• (1) https://www.federalreserve.gov/monetarypolicy/fomcminutes20230503.htm
• (3) https://www.realtrends.com/articles/how-the-debt-ceiling-crisis-could-derail-the-real-estatemarket/
• (4) https://cre.moodysanalytics.com/insights/cre-news/whats-the-real-situation-with-cre-and-banksdoom-loop-or-headline-hype/
• (5) https://www.bea.gov/
• (6) https://www.census.gov/construction/nrs/pdf/newressales.pdf
• https://www.nar.realtor/newsroom/existing-home-sales-faded-3-4-in-april
• (7) https://www.globest.com/2023/05/23/industry-experts-talk-dining-trends-and-real-estate-aticsc/
• (8) http://www.sca.isr.umich.edu/
• (9) https://www.nar.realtor/newsroom/pending-home-sales-recorded-no-change-in-april
• (10) https://www.census.gov/construction/nrc/pdf/newresconst.pdf

NATIONAL OVERVIEW

The US industrial sector has been the forerunner of commercial real estate over the past decade. And so far, prevailing winds appear to be carrying the sector’s growth forward. In the early 2010s, the industrial sector’s growth was defined by the e-commerce boom, as Amazon carts replaced shopping carts and Cyber Monday became Black Friday for millennials. As a result, retailer demand for warehousing and flex spaces skyrocketed. According to MSCI Real Capital Analytics, industrial property prices grew by an industry-leading 154% over the past ten years and more than 45% since the start of the COVID-19 pandemic.

During the pandemic years, a structural shift in consumer activity amid lagging supply chains brought forward the worst congestion ever since the dawn of widespread containerization. Clogged ports and rising inventories allowed many inland industrial properties to capitalize on new demand. While most supply chain bottlenecks have gradually subsided, the new post-pandemic normal for online consumption keeps industrial in CRE’s driver’s seat.

Like all sectors, recent increases in borrowing costs have dampened transaction activity in the industrial sector. According to the industry group NAIOP, net absorption slowed during the final half of 2022, dropping to 176 million square feet from the 236 million square feet absorbed during the first half of the year. Still, industrial properties have begun 2023 performing better than some expected as demand continues to outpace supply in several key markets.

Data from the February Logistics Managers’ Index (LMI) show a rise in forward-looking sentiment for the warehouse sector. After hitting a nadir in November, the LMI future metric has climbed for three consecutive months and, in February, reached its highest mark since last Summer. Moreover, the LMI future has continued to signal expansion in the sector despite falling throughout Fall 2022 (an index reading above 50 indicates expansion, while below 50 indicates contraction).

Simultaneously, warehouse capacity experienced its first uptick in over two years, with additional supply expected to come online later this year. Still, analysts don’t expect this new supply to roil industrial markets. As Zac Rogers, lead analyst for the LMI, puts it, a modest short-term jump in warehouse capacity “will make it more sustainable over the long run.” Other industry observers appear to agree. In early March, NAIOP raised its projections for net absorption over the next two years, projecting 310 million square feet of absorption in 2023, followed by 323 million in 2024.

Financials

TRANSACTION VOLUME

According to MSCI Real Capital analytics, industrial transaction volume totaled $154.0 billion in 2022 — decreasing 13.3% from the previous year. Despite the year-over-year pull-back, 2022 remains the second-most active year for industrial transaction volume on record.

Compared to the pre-pandemic peak (2019) of $117.6 billion, 2022’s total rose 31.0% higher. Overall, the long-term drivers of the sector’s momentum remain intact. A return to in-store shopping eased the acute demand surge for warehouse and fulfillment space. However, the secular convergence of retail and industrial should be a tailwind for industrial sector demand for the foreseeable future.

According to the 2023 ULI-PwC Emerging Trends in Real Estate Survey, real estate investors gave a net buy rating for all tracked sub-types of industrial, including flex, fulfillment, manufacturing, R&D, and warehouse.

CAP RATES AND PRICES

Despite the long-term optimism surrounding the industrial, the sector’s cap rate profile was subject to the same market forces that saw yields rise for all other commercial property types.

After industrial cap rates sank to a new all-time low of 5.2% in Q1 2022, the effects of rising benchmark interest rates were felt throughout the year. Cap rates rose each of the next three quarters, settling at 5.3% at the end of the year. In total, cap rates rose by 19 bps between Q1 and Q4.

As cap rates have risen, pricing momentum has ebbed in the industrial sector. Still, prices kept rising through the first three quarters of the year, reaching a new all-time high of $164/sqft in Q3.

However, in Q4, slowing growth eventually turned to contraction, and average prices in the industrial sector fell marginally to $158/sqft — sliding 3.7% quarter-over-quarter. Nevertheless, industrial prices remain up by 3.0% from a year earlier despite the single-quarter drop.

Regional Performance2023Regional

In developing the regional industrial rankings, the SVN Research Team utilized a scoring matrix. The matrix offers a comprehensive view of how regional markets are performing within the context of growth from a year earlier, as well as compared to before the pandemic. The eight following criteria were included in the matrix:

1. Transaction Volume: 1-Year % Change
2. Transaction Volume: % Change Over Pre-Pandemic (2019)
3. Share of US Transaction Activity: 1-Year Change
4. Share of US Transaction Activity: Change Since Pre-Pandemic
5. Cap Rates: 1-Year Change
6. Cap Rates: Change Since Pre-Pandemic
7. Pricing: 1-Year % Change
8. Pricing: % Change Over Pre-Pandemic

TOP PERFORMERS: SOUTHEAST

Echoing a common theme across all commercial real estate verticals, the Southeast again stands out as a top-performing region. The last several years have been a renaissance for commercial real estate in the Southeast, as migration trends have favored the region, causing product demand to surge across property types.

As a result, no region has seen a larger market share increase over the past three years than the Southeast. In 2019, the year before the pandemic, $19.8 billion of industrial assets changed hands in the Southeast, accounting for 17.4% of the nation’s total. In 2022, this total surged to $31.1 billion, accounting for 20.2% of all US activity — a 2.8 percentage point gain in total market share. Southeast industrial assets have also seen some of the most intense pricing pressures in recent years, with valuations rising by 46.0% between 2019 and 2022.

TOP PERFORMERS: SOUTHEAST

The Mid-Atlantic’s 2022 strong showing crossed over to the industrial sector as well. While transaction volume decreased in the region compared to the year before, it did so by less than any other region. Still accounting for $15.3 billion of traded industrial assets last year, transaction volume only dipped by 4.5% in 2022.

Meanwhile, every other region saw a year-over-year decline in volume between 11.3% and 20.8%. The Mid-Atlantic also managed to buck the 2022 trend of rising cap rates. On average, cap rates for industrial assets dipped by 7 bps in 2022 compared to the year prior — the second-best mark of any region.

Our Orange County commercial real estate brokers will help you every step of the way in finding the right industrial real estate investment property, contact us for details.