The Azucena Take: The Supply Chain Crisis and Investment Real Estate

We are halfway through 2022 and the supply chain crisis is still ongoing. As a result of the economic shutdown brought on by the 2020 pandemic, the supply chain crisis has been the root cause of numerous economic problems. Most notably, it has been a major factor in the ongoing inflation crisis. Less talked about is how the supply chain crisis has impacted the investment real estate market.

Right away one might think this is a problem for those invested in retail property. The lack of raw material means they lack products to sell. Yes, this is true but it doesn't mean that other real estate markets are not affected. Raw materials can also be used to create building materials that are used to build new properties. Thus everyone is going to be impacted regardless of what market they are in.

However, this doesn't mean that everyone is hurting during the supply chain crisis.

Impacted by the Supply Chain Crisis

Let's start with another obvious one, the current housing demand. More people are looking for homes to buy but supply is unable to keep up with demand. Thus, demand for apartments is still high while vacancy rates are still at an all-time low.

Next look at the warehouse properties that are currently benefiting from this crisis. Many industries are rethinking their approach to supply management and are stocking up on resources that are more difficult to acquire. Keeping these resources will require more space which has led to a boom in warehouse properties. It should be noted that this is only a short-term solution while a long-term solution will bring new opportunities.

Those new opportunities come in the form of bringing more manufacturing jobs to America. This crisis has shown the problem of being too dependent on China for manufacturing, thus many companies are starting to bring part of their industry to the United States. This will overall add to the already boom in demand for industrial property.

While still early, the benefits are already showing as cross-border trade with Canada and Mexico has jumped significantly in 2022. As a result; industrial properties in American cities that are close to either the Mexican or Canadian border have seen a major jump in value.

 What it Means for Investors?

For investors, it's an example of how there is always an opportunity in even the darkest of times. Nothing is going to stay the same forever and one needs to prepare for an ever-changing economy. Investors already familiar with industrial properties should talk to an expert to see about entering these emerging industrial hubs.

The Azucena Take provides an inside look into the investment real estate market using the research done and data collected by Marcus & Millichap