A majority of South Florida real estate professionals expect warehouse/industrial properties to turn large profits in 2017, according to a newly released survey by Fort Lauderdale-based Berger Singerman.
Generally more optimistic about the strength of South Florida‘s commercial real estate sector in 2017, 30 percent of respondents told the business law firm they expect the industrial sector to yield the largest returns of any type of commercial property because of the growth of e-commerce and increases in online shopping. That’s a 16 percent increase in respondents who are bullish on industrial properties compared to last year’s survey, the company said.
Click here to view the Berger Singerman South Florida Real Estate 2017 Outlook Survey
Click here to view an Infogram of the Survey
Last year, survey respondents were more confident in brick-and-mortar retail properties. But in the latest survey, just 8 percent of respondents expect that type of commercial real estate to yield the highest returns. That’s a 20 percent decrease in respondents who expect retail properties to be most profitable compared to last year, the company said.
“The increase in optimism for the industrial sector is a result of the need to locate distribution centers in areas that can accommodate same or next day delivery of e-commerce purchases,” said Jeffrey R. Margolis, partner at Berger Singerman. “The increase in the industrial sector goes hand-in-hand with the decrease of the retail sector; the growth in e-commerce drives demand for distribution facilities while diminishing the need for traditional retail stores.”
Younger respondents to the survey, namely 50 percent of millennials and 36 percent of Gen Xers, have increased confidence in the profitability of South Florida’s industrial sector because they expect those properties to provide a quicker returns on investments.
“The investment styles of millennials, many of whom entered the investment market over the last ten years, are greatly influenced by the great recession,” said Marc Stephen Shuster , partner at Berger Singerman.“They have limited risk appetite for deals that have a longer hold horizon or require a lengthy repositioning period. The industrial sector is more desirable to investors from those generations because they require less construction. With industrial you typically don’t have to do much to transform the space.”
Other factors affecting respondents’ outlook on real estate: Zika, the uncertainty of foreign relationships and foreign investments and oversupply of residential properties versus the undersupply of industrial properties.
Berger Singerman prepared and conducted the survey in November and December 2016. Respondents included South Florida developers, investors, brokers, and executives from financial institutions and investment groups.