Key Takeaways
- Industrial real estate and EV markets ‘paused,’ but pent-up demand building for post-election surge.
- U.S. EV market lagging rest of world but expected to eventually “take off.”
- Industrial market likely to accelerate after pause, making site readiness efforts such as VIP by DRP critical to landing development projects and investment.
The historically red-hot industrial real estate market from the past few years has plateaued since the fourth quarter of 2023 and entered a “pause,” but is primed for a post-election surge due to pent-up demand for electric vehicle (EV) and battery/energy storage projects.
Contributing causes of the pause include everything from high-interest rates and increased construction expenses to automakers’ post-UAW strike reassessment of labor costs and the looming November election.
The Detroit Regional Partnership’s first Expert Insights event on May 15 highlighted these market realities. The event featured a panel of DRP investors, including panelists: Romano Curti, director, Barton Malow; Paul Hoge, senior vice president and partner, Signature Associates; Patrich Jett, senior vice president, Colliers International; and Shannon Selby, vice president of real estate services, DRP. The DRP’s Executive Vice President of Economic Development Justin Robinson moderated the panel at the Detroit Athletic Club.
Despite recent cooling, industrial real estate to remain hot with EV and energy storage projects likely to drive future demand.
“It’s been one of the most prolific industrial markets in the past 50 years,” said Robinson. “There’s been a slight drop-off in 2024, but it’s plateaued at a high-level.”
Curti echoed that: “Our (construction) volumes of work have basically gone up three times and the pipeline is filled. I’ve never seen the kind of projects that are out there – I’m tracking $100 billion in projects (in the automotive and battery storage space).”
While there has been some cooling in EV projects, Curti sees the industrial real estate market in good shape thanks to energy storage projects picking up to support batteries and the battery materials supply chain creating pent-up demand.
With the rest of the world is electrifying – lagging U.S. market expected to eventually bring major EV expansions
While EVs adoption in the U.S. is lagging much of the rest of the world, experts like Curti, expect it to eventually take off, particularly once the vehicles hit the 400-mile per charge mark.
“Europe’s not stopping. China’s not stopping. As that continues the trend will continue to grow here,” said Curti. “(Internal combustion engine vehicles) will continue, I don’t see that stopping, but when EVs take off, there will be major expansions that will need to happen at all these facilities and it’s going to take up a lot of our construction time, just like the battery plants have.”
Contributing factors to the EV and industrial real estate pause, include many automakers’ reassessment of the market and vehicle lines based on lower than expected U.S. consumer demand, increased labor costs, and the looming election.
“We are seeing a lot of activity in the marketplace, we’re just not seeing a lot of deals punching through to the goal line,” said Jett. “There’s a large pipeline that continues to grow.”
Industrial demand forecasts make site readiness critical to capitalize on future growth.
The expert panel’s conversation highlighted the need for regions to focus on preparing properties for development to capitalize when that pent-up demand hits the market.
That makes efforts like the Detroit Regional Partnership’s Verified Industrial Properties – VIP by DRP – program critical as it vets properties through third-party engineers who perform initial due diligence to speed up the site selection process.
Selby explained how VIP by DRP – buoyed by $17 million in federal and state grant funding – aims to vet 120 large industrial properties (10+ acres) over the next three years providing up to $215,000 per site to aid with physical side studies and closing costs.
“Finding the sites (over 100 acres) is one of the biggest challenges at the moment,” said Jett, praising VIP’s efforts to help site selectors. “Finding sites that have power and water capacity (is a big challenge). In this market in the next couple years, every site of size will have that due diligence completed, and we’ll be a little bit ahead of our competitors, and I think that’s fantastic.”
