By Real Capital Analytics on March 6th, 2020
There are a number of market signals a developer might look to for triggers to build, besides the willingness of bankers to provide debt. When sale prices are high relative to the long-run trend, replacement costs are more likely to be close enough to incentivize a developer to move forward. The RCA CPPI for the U.S. industrial sector was 59% higher in January than the average level since 2001, which should be a signal to build.
With prices high and strong investor demand for assets, U.S. industrial construction is indeed rising. The 12-month trailing value of industrial starts hit $36.7 billion in Q4 2019, higher than the average $28.8 billion in starts per year over the last five years. This pace of construction bucks a trend seen across other major property sectors where despite price increases, construction is moderating due to cost and regulatory constraints.
Mike Savino contributed data analysis for this article.
A version of this article first appeared in US Capital Trends, published February 26. If you are interested in learning more about RCA publications, contact us.
The next edition of US Capital Trends, covering February transaction data and lender trends, will be released March 25.
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