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Industrial Sector Remains ‘Red Hot’ Despite Headwinds

April 08, 2019

Investors still see industrial properties as favorably as they did six months ago, despite global trade tensions and labor shortages.

Trade talks between the U.S. and China are looming over the industrial sector. Due to these ongoing trade tensions, retailers are importing larger quantities of products than normal, to beat potential hikes in tariffs on goods from China.

Barring successful negotiations, the U.S. plans to raise the 10 percent tariff on $200 billion worth of Chinese goods that took effect in September 2018 to 25 percent this spring. The U.S. has already imposed 25 percent tariffs on $50 billion worth of Chinese goods. On the other hand, reciprocal tariffs imposed by the Chinese government lowered Chinese demand for American-made goods. If this trend continues, demand from manufacturing occupiers could decline, according to real estate services firm Colliers International.

American manufactures, one of the top growing occupiers of industrial real estate in 2018, added jobs in the sector from August 2017 to February 2019. This month, the sector lost jobs for the first time in 20 months. Though manufacturing currently makes up only a small component of demand for industrial space, according to industry experts, the sector was positioned to expand this year, according to the 2019 forecast from brokerage firm Marcus & Millichap.

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