Investcorp bullish on US industrial and multi-family residential properties

An e-commerce boom and shifting consumer preferences are fuelling demand for warehouses and rental apartments

The third highest amount of individual Zakat donations to the UNHCR came from the US in 2020. Getty Images

Industrial and multi-family residential properties are expected to continue to perform strongly in the US, driven by shifting consumer preferences following the pandemic, according to Investcorp.

The pandemic provided the catalyst for an e-commerce boom, creating demand for industrial warehouses. Meanwhile, millennials' preference for "the flexibility and mobility of renting" has helped sustain demand for multi-family residences, the Bahrain-listed company said.

“The future prospects for industrial and multi-family remain bright given a number of secular tailwinds supporting their growth,” Investcorp said.

Investcorp, which counts Mubadala Investment Company as its biggest shareholder, has been actively investing in the US and Europe, with about $5 billion in the US and $1bn in Europe invested in various asset classes.

The company said that currently the supply of industrial warehouses is not meeting demand.

“E-commerce sales are growing at a 15 per cent compounded annual growth rate. Industrial supply, on the other hand, is growing at a 1.5 per cent CAGR. This disparity is expected to result in a supply/demand imbalance favouring owners of industrial real estate assets, especially in desirable logistics markets,” it said.

Lifestyle changes have also led to an uptick in demand for multi-family properties in the US, Investcorp said.

Multi-family properties are apartment buildings or condominiums. Since the early 2000s, the multi-family sector experienced the shortest period of negative rent growth when compared to other sectors, the company said.

“Class B workforce housing has benefitted the past decade and is predicted to continue to benefit from structural demand shifts including limited income growth and stricter credit standards, as well as decreasing supply.”

Last year, Investcorp sold eight multifamily properties in the US to multiple buyers for more than $900 million.

“Industrial and multi-family real estate have delivered exceptional performance over the last decade. We expect this trend to continue given the strong fundamentals in these sectors, which have been further strengthened by Covid but will continue to support these markets post-pandemic.”

Other property sectors such as retail, hospitality and offices have underperformed and their future prospects "remain uncertain" due to challenges stemming from the pandemic, the company said.

Last month, Investcorp reported a 33 per cent jump in first-half net profit on the back of higher asset-based income.

Net profit attributable to equity holders of the parent for the six-month period ending December 31, 2020 climbed to $63m as asset-based income increased more than three-fold to $45m.