Recipe for Success: Three Key Markets Keep Industrial Development Afloat as Interest Rates Soar

Recipe for Success: Three Key Markets Keep Industrial Development Afloat as Interest Rates Soar

Just this week, it was announced that the Federal Reserve raised short-term interest rates by 50 basis points, bringing the federal funds rate to a range of 4.25% - 4.5%, the highest level we have seen since December 2007. We’ve watched this continued increase in interest rates over the past year along with its inevitable domino effect on lenders and developers. As banks and equity sources have become increasingly conservative as a result of these hikes, investors and developers have been slowing new project starts as it has become more difficult and more expensive to finance these developments.

At Stonemont, we are confident that our expertise and momentum will lead us to weather this capital market slowdown and push forward with new development in key markets across the country. The industrial boom is not over despite recent market turbulence, and those that are well positioned to capitalize transactions will be able to keep up the growth as competition within the industrial field thins out and slows down. Tenant demand remains high and is still running well ahead of supply as users scramble to find space to meet consumer needs. Our pipeline of new projects continues to expand, and our team at Stonemont is bullish on several markets across the U.S. that will outpace others in new industrial growth. We expect to see development in the following markets skyrocket as the decade progresses:

Florida

Florida has been the golden child of our development strategy over the past couple of years, and we plan to remain active there as both local and national users seek to grow their footprints in the Sunshine State. We’re keen on the “From-Florida To-Florida” model, meaning most goods that are created or manufactured in Florida stay in Florida. We are targeting markets with strong labor fundamentals and sites that have irreplaceable access to interstates and connectivity to major population centers. All of our projects are centrally located in Florida because of the area’s convenient access to all regions of the state, abundance of available labor and proximity to I-75, I-95 and other major transportation routes. We have been nothing but pleased with the success we have seen in the state thus far and believe we are well positioned to expand here over the next few years.

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Texas

According to Stonemont Senior Vice President Josh Wheeler, Texas has seen impressive population growth statewide especially as those from the Northeast and Rust Belt have migrated to Southern markets since the pandemic. Texas also boasts an especially advantageous pro-business environment, attracting major names recently including Charles Schwab, State Farm, Tesla, Apple and Oracle. No income taxes and one of the nation’s deepest pools of labor have also made Texas one of the top places for industrial development, and we have been confident in our growth strategy across several markets in the state where distribution and warehouse supply is in need. Some of these include the greater Dallas-Fort Worth metroplex, which is one of the fastest-growing areas in the country, the Port of Houston and border towns such as El Paso. Everything is bigger in Texas, including the need for prime industrial development to serve the large national users seeking to call it home.

Port Cities

The East Coast has stolen the spotlight from West Coast port markets in recent years, as major markets out West have become overcrowded and unable to allow larger numbers of containers to come into the ports. The East Coast remains wide open with an abundance of available land, and growth has been immense in areas such as Virginia’s coast, Charleston, Savannah and Jacksonville. Savannah recently deepened its canal allowing more traffic and larger ships, which spurred a boom in developer interest and industrial growth outside the city to accommodate the need for new warehouse and distribution space. Charleston recently celebrated the completion of its Harbor Deepening Project, which boasts the deepest harbor on the East Coast at 52 feet. As with the other markets mentioned above, these East Coast regions are also facing incredible population growth and an increase in user demand. Jacksonville is also slowly becoming as favorable as Savannah and Charleston, as JAX Port continues to invest in its future, and we are beginning to work on new projects in the market, as this will likely be the next frontier for a development boom.

While we expect to continue battling this unprecedented hike in interest rates, increased cost of capital and ever changing capital markets, for the foreseeable future, at Stonemont we are confident in our ability to continue driving success for our investors and partners based on our uniformed growth plan and proven track record of developing first-rate, Class-A industrial developments in key markets where user need is high. We remain bullish on this strategy and look forward to seeing where the next prime investment markets will materialize as our country’s industrial landscape continues to shift and evolve.

To learn more about Stonemont’s capabilities and ongoing projects, visit stonemontfinancial.com.

Author: Avery Dorr

Bidd Smith

Project Manager at Economic Development, Berkeley County (SC) Government

1 年

Great read, Avery! Thanks for sharing..

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Absolutely agree, Avery Dorr! Florida is on fire and your success here is no surprise.

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