SAN ANTONIO, TEXAS (January 5, 2023) - In spite of stellar property fundamentals remaining, both industrial developers and lenders are looking to play it safe on new construction, according to Wealth Management Magazine. In a story titled "Pullback On Construction Lending Likely to Cut Back Industrial Pipeline in 2023" the publication notes that the rapidly rising cost of capital in the commercial real estate industry will most likely reduce U.S. industrial starts to a seven-year low in 2023. This is likely to occur, despite a projected 10 percent growth in industrial rents.
Even with solid property fundamentals, the increased cost of debt and equity, along with ongoing discovery for land and asset prices, has made both industrial developers and lenders more cautious. Less well-capitalized developers, such as those specializing smaller, speculative projects, or those with focusing on tertiary sites face the biggest hurdles.
Northmarq's Bryan Leonard noted in the article that "while industrial construction is expected to level off in 2023, this was a banner year for both industrial construction starts and deliveries." He went on to add that high demand for space is keeping rental rates rising, which should provide developers some offset to higher interest rates.
Other topics covered include:
- Regulatory Pressures
- Construction Financing
- Debt Funds
- Construction Levels