Industrious Capital is a fully integrated private equity real estate investment fund that owns, operates and manages superior investment opportunities. Our investment strategy is to use our deep local expertise in three value-added functions:
Source undervalued industrial real estate assets
Stabilise the assets using our in-house leasing and management team
Refinance the assets at highly competitive rates
Why Now: The Impact of Inflation
There are many reasons for the recent rise of inflation in the US, however generally speaking inflation is caused by an imbalance between supply and demand (too many dollars chasing too few goods and services). And while rising inflation will create macro economic challenges, we believe that industrial real estate, as an asset class, is uniquely positioned to favorably benefit in an inflationary environment.
Supply Side.
On the supply side one of the key drivers of inflation is a general breakdown of global supply chains. Since the 1980s the US economy has become increasingly financialized, which has resulted in an economy where the the vast majority of the goods consumed by Americans are no longer produced in America. The global outbreak of COVID-19, and its accompanying lockdowns, as well as the recent Russian invasion of Ukraine has shown, that this system is fundamentally fragile and a major drive is currently underway to reshore critical industrial capacity back to the US. We foresee an increase in demand for industrial real estate as this process of reshoring begins.
Demand side.
On the demand side one of the key drivers of inflation has been the low federal interest rate as well as its quantitative easing policy. However since the start of the year the Federal Reserve is aggressively unwinding these policies in order to address inflation. During its June 2022 meeting the Federal Reserve raised interest rate to 1.75% and is expected to raise rates to 3.4% by the end of the year. In March 2022 the Federal Reserve ended its quantitative easing policy and in June 2022 began reducing its Treasury debt holdings by $30 billion and its mortgage-backed securities holdings by $17.5 billion monthly. It is expected to double these monthly cuts starting in September. We believe that higher capital costs will have a cooling effect on leveraged buyers, however Industrious Capital intends to acquire assets in all-cash transactions which will give us fundamentally better economics than our competitors.