You make your money in real estate when you buy, not when you sell. In recent years, commercial real estate prices have boomed. Bubbled might be a better word. Commercial real estate certainly isn’t the only asset class that looks expensive today, but it is the only one that the Fed has put in its cross hairs. Commercial real estate is a reliably cyclical business. In all likelihood, we are much closer to a cyclical top than we are from a cyclical bottom. Limiting your exposure to commercial real estate today isn’t a bad idea, but that doesn’t mean you shouldn’t be preparing for the next bust.
One sector of the commercial real estate market that appears to offer profound secular promise is in the industrial space. Private Equity Firm Blackstone just made a $1.5 billion investment in the sector. The WSJ reports the details.
Blackstone, the world’s largest private real-estate owner, has signed a contract to buy the 12 million-square-foot portfolio of mostly West Coast property from LBA Realty LLC, an Irvine, Calif.-based investment company with properties in the western U.S., according to people familiar with the matter….
Distribution used to be just another part of the supply chain. Now logistics has moved up in its importance in corporate strategy.
Charles SullivanExecutives at logistics companies say their businesses are benefiting from the growing importance of distribution in retail and other industries. Increasingly, business profitability is being determined by the efficiency, speed and costs of moving goods, they say.
Some businesses, like retailing, are being completely transformed by distribution as consumers migrate online, cutting out the need for bricks-and-mortar stores. Many mall owners have suffered while owners of logistics properties have been the big winner from this trend.
“Distribution used to be just another part of the supply chain,” said Charles Sullivan, president of U.S. operations for Global Logistic Properties Ltd., the second-largest owner in the U.S. sector. “Now logistics has moved up in its importance in corporate strategy.”…
Investing now could be particularly risky. An expected surge in new supply in several parts of the country—including the Atlanta and Dallas regions—could weigh on returns, analysts said, while the torrid growth of e-commerce could slow. Because of razor-thin margins and high delivery costs, online retail remains unprofitable or barely profitable for many companies despite its surging popularity.
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Jeremy Jones, CFA
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