Industrial Real Estate and the Opportunity for Value Investors

investmentnews.com:

by Dave Fazekas and Brendan McCurdy

As the third-largest U.S. industrial real estate operating platform, Ares believes that we are entering the most compelling entry point into the industrial real estate sector since the GFC (Great Financial Crisis).

To better understand what is going on within the sector, Ares’ Financial Advisor Solutions Team sat down with the Head of Ares Industrial Management, Dave Fazekas, who oversees a team of 170 professionals focused on sourcing, acquiring, developing and managing industrial real estate properties across the U.S. Dave has more than 26 years of experience and has helped build Ares’ $22.5 billion¹ industrial real estate group into the dynamic platform it is today.

_{¹ As of March 31, 2024.}

I think the place to start is by emphasizing, maybe against expectations, what a resilient year it was in 2023. There was a widespread expectation based on interest rate hikes that we were heading for a recessionary environment of low growth.

In actuality, GDP and the overall economy continue to exceed expectations. The biggest contributor to this has been household consumption, driven by a strong labor market and continued wage growth, which is filtering through the sector.

We are now seeing signs of a bottom in transaction pricing forming and a resurgence in transaction volume first-hand, with activity levels more in line with the levels we saw in late 2021. Compelling opportunities have started coming to market— primarily from large ODCE² funds that are facing redemption queues (with problems stemming largely from heavy office exposure) and have a need for liquidity. We are also in the market with several small portfolios to tactically sell, with a deep pool of high- quality bidders above