TAG Industrial Watch: May 13, 2023

With each bank failure, companies, such as those in the industrial industry, are finding it more difficult and expensive to secure business loans. For this reason, sale-leasebacks are becoming a popular solution. By selling their property to an investor and renting it back from them, businesses can turn their biggest asset into working capital. Instead of paying interest on a loan, businesses pay rent with the benefit of there being no loan to repay. Given that the bank prime loan rate is 8.25%, but the average cap rate on recently sold industrial properties is 6.5%, businesses can effectively pay a lower rate by conducting a sale-leaseback (FRED, CoStar). But only if they act soon.

Just a year ago, industrial cap rates were at 5.7% and cap rates are rising at the fastest annual pace since 2010. During the first quarter of the year, the dollar amount of industrial loans originated collapsed by 72% year-over-year to lead all commercial real estate sectors. Given that most of this decline took place prior to the bank failures, the second quarter could be even worse. Simply put, falling industrial demand leads to higher cap rates, which means higher rents and/or less capital for businesses in need of a sale-leaseback.

I N D U S T R I A L   N E W S

Sale-Leasebacks Offer A Cure For A Tough Market In 2023
Globe St. – May 9, 2023
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Commercial Real Estate Loan Originations Recorded A Big
Drop In The First Quarter, Partially Due To Lack Of Demand

WealthManagement.com – May 12, 2023
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Commercial Real Estate Lending Plunged 56% Last Quarter
As ‘Logjam’ Of Uncertainty Clogged The Market

Yahoo! Finance – May 10, 2023
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CRE Sales Plummet in Q1 As Expected; Here’s What To Focus On Next
LoopNet – April 19, 2023
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Construction Layoffs Jump In March As Homebuilding Slows
Bisnow – May 5, 2023
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R E G I O N A L   N E W S

In Rare Move, Office Being Torn Down For Industrial Space
Connect CRE – May 8, 2023
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Pension Fund Looks To Invest $1.5B With Bridge Industrial
Bisnow – April 28, 2023
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Stream Realty Acquires Land For 900 KSF Wisconsin Industrial Park
Commercial Property Executive – May 3, 2023
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Record Tally Of Industrial Projects Near Completion Across Dallas-Fort Worth
CoStar – April 25, 2023
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New Economic Incentive Plan Clears Hurdle In Texas House
The Texas Tribune – May 4, 2023
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