Inflation and rising interest rates, amid broader fears of a recession, have tightened debt markets and side-lined some equity. Consequently, some developers have begun deferring or walking-away from previously announced projects.
In recent years, forward sales of industrial developments were not uncommon. Such sales had the effect of de-risking development from traditional considerations around fluctuating interest and cap rates. Given the rising interest rate environment, forward sales will become rare in quarters ahead. This will be a headwind to some merchant developers. Some will welcome this development as a way to help cool the market while, simultaneously, it could constrain an already supply constrained market.