2024-07-26 17:15:02 ET
Summary
- Second quarter earnings reports from Prologis and First Industrial indicate growth returning to the industrial sector.
- Industrial real estate market rental rates stopped growing in late 2023, but recent data suggests supply is subsiding, demand is returning, and rates are increasing.
- Mark-to-market opportunities for industrial REITs range from 20% to 100%, indicating stabilized P/FFO multiples of 10X to 14X.
Second quarter earnings reports from Prologis ( PLD ) and First Industrial ( FR ) suggest growth is returning to industrial.
Industrial real estate market rental rates largely stopped growing in the back half of 2023 and early 2024. To reflect the cessation of further rate growth, FFO multiples of industrial REITs dropped materially to 19.8X from closer to 30X during peak growth. Recent data suggests, however, that supply is subsiding, demand is returning, and market rental rates are once again headed north. If market rental rates are returning in addition to the still massive mark-to-market opportunity, I think industrial REITs in general are opportunistic, and some of the better values are particularly interesting....
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Industrial Real Estate Returning To Growth