Wealth Management: Continued Confidence in Industrial Real Estate, Despite Headwinds

Below is an excerpt. Read the full Wealth Management story here.

March 8, 2023 – Despite strong fundamentals that are continuing to position industrial as one of the most favored property sectors, rising capital costs and slowing economic growth are creating a cooling effect on what has been a white-hot industrial investment market.

Like many investors, BKM Capital Partners was proceeding cautiously in the second half of 2022 due to the higher rate environment. “We are risk on for 2023, because of the stellar fundamentals,” says Brett Turner. Currently, the firm has 11 industrial business parks under contract that will close in the first quarter of 2023 with a total combined value of about $350 million. According to Turner, the firm’s occupancy levels and leasing spreads – the difference between the existing and a new rate—have never been higher; credit loss is at an all-time low; and tour activity for prospective tenants also remains very high. BKM Capital also is starting to see some adjustment in seller expectations with cap rates that have moved 50 to 75 basis points higher since mid-2022. “We feel like we can get some good risk-adjusted returns by taking positions at this point in the market,” says Turner.