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Industrial Assets Will Not Escape Coronavirus' Wrath, But These Metros Are Better Positioned To Thrive


Whether a metro area’s industrial sector survives this downturn without significant asset disruption depends entirely on where a region’s industrial buildings are located and whether the community is already e-commerce focused, a new study from CoStar Group says.  

That's why Dallas-Fort Worth is better positioned to survive an industrial downturn than cities like energy-dependent Houston and auto manufacturing-focused Detroit, CoStar Portfolio Strategy Senior Consultant Juan Arias said. 

DFW’s industrial sector has the right product mix to weather the storm, having built larger industrial assets that cater to e-commerce distribution. Many of DFW’s recent builds cater to the e-commerce delivery sector by offering cross-docks and facilities with higher clear heights, Arias said. 

“Metros like Dallas have been able to build plenty of those types of industrial buildings in this cycle and have attracted a lot of demand from those e-commerce players in this cycle so far,” Arias said. 

In addition to a strong supply of new buildings, metros like DFW, Atlanta and Chicago have strong third-party logistics hubs, which CoStar expects will help them survive a downturn without too much disruption. 


Other strengths include cities that have infill logistics properties that may be older, but are best positioned to accommodate growing e-commerce delivery demands, Arias noted. 

DFW’s product mix has made it an e-commerce hub for all of Texas, positioning it to see less pain when industrial takes a hit from disrupted supply chains overseas and consumer retrenchment. 

“Those newer types of product that now have e-commerce tenants will continue to outperform,” Arias said.

But, he adds, in areas like Houston where industrial assets often cater to energy-related tenants and traditional brick-and-mortar retail, those products will be impacted. 

Areas with greater potential for industrial real estate disruption include Detroit, Seattle and Nashville, all of which were already underperforming and rely mainly on auto and airplane manufacturing as tenants. 

Houston and Oklahoma City also will feel a pinch as oil prices plummet, leading to energy company bankruptcies and falling occupancy among industrial assets tied to this particular space.