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Industrial Construction Comes Back with a Boom
07/31/2017

Much has been made about the roaring increase of the stock market.  Many people happily open their 401K statements like kids on Christmas Day.  However, much has been made about the decrease in real estate.  Home sales are down.  Malls are facing vacancies.  Large names like Sears, JCPenney and even Macys have been closing locations.  The boom of the digital marketplace is the end of the brick and mortars?  Not so fast..

According to Wall Street Journal, Industrial Construction has climbed to a 10 year high.  Where is this boom coming from? A national real estate firm JLL reported that 247 million square feet of industrial space will be delivered this year while rents and vacancies also have maintained their favorable record levels.  A separate report from CBRE found 72 million square feet of warehouse and distribution space is currently under construction of which 43% is pre-committed, the highest rate since 2000.

Many large real estate analysts predicted a general slowdown in 2017 construction, however, the industrial sector has seen its lowest vacancy rates in 16 years and 18% of the 2016 3rd quarter leases were for newly built space.  While the digital marketplace may be causing agitation at those large retailers, those same e-commerce companies are driving the demand for built-to-suit high performance distribution centers.  Construction of these properties increased 29% in the first quarter of 2017 compared to the prior year. 

Is this a flash in the pan?  A 2016 Colliers International report found that online sales comprised approximately 10% of all US sales yet they are growing at a rate of five times that of brick and mortar locations. 

When looking for the real estate sector it makes sense to dig deeper before believing some of the bad news reported. One carrier we have had the some of the best results with in the construction sector has been Crum and Forster.  Their specialized approach to the various sectors of the construction industry offers a more unique product tailored to the insured’s needs.  Just like the real estate market, the insurance market is developing into a more niche business and if your carrier cannot offer value changing alternatives you may end up being just like those stores at the local mall wondering what happened. To learn more about our construction insurance services that will help you protect and grow your company, visit AssuredPartners Construction.

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