Industrial REIT Valuations

Broadly, industrial multiples have fallen below their 5-year average. This is partly due to a shortage of accretive investment opportunities.

Development is on hold as the supply glut works through, and private market valuations have not reset quickly enough to encourage large-scale acquisitions.

From a macro standpoint, industrial real estate looks well-supplied, possibly even oversupplied. Stephanie Rodrigues of Colliers states,

“More than 85% of these projects were built on spec. Demand began to normalize in early 2023, averaging 52M SF over the past five quarters, or about 80% of the pre-pandemic average."[1]

That means investors must evaluate industrial REITs largely based on the existing portfolio and what mark-to-market rent increases and valuation trends they expect over the next 3-5 years.

[1] US Industrial Construction Outstrips Tenant Demand for Sixth Straight Quarter (globest.com)