Warehouse Prices Spurred by Demand

July 20th, 2021

As E-Commerce increases, warehouse distribution centers jockey for space.

 

Today’s blog is by Gayl Southard, Vice President of Administration at SafeSourcing.

Due to the surging e-commerce purchasing, warehouse distribution centers are jockeying for limited space.  Competition is driving up industrial rents as retailers and logistics providers look to get goods closer to the consumers, resulting in bidding wars in coveted locations.  Businesses are looking to get their goods to consumers as quickly as possible.  “Demand for industrial real estate is so strong that taking rents — the initial base base rent agreed on by a landlord and tenant — are rising faster than rents, according to real-estate firm CBRE Group Inc.  Industrial taking rents were up 9.7% in the first five months of 2021 compared with the same period last year, while industrial asking rents rose 7.1% according to CBRE, which tracks 58 U.S. markets.”1

Logistics space, close to cities and ports, and for big-box warehouses like those used in online fulfillment operations, prices are rapidly increasing.  In Northern New Jersey, first-year base rents  jumped by a third year-over-year through May, while Southern California’s Inland Empire rose 24.1%, according to CBRE.  It is creating a similar situation as the housing market, where the demand is greater than the market.  The pandemic lockdown and store closures have pushed retailers into online marketing.  E-Commerce will account for 26% of all US sales by 2025.  Companies are also looking into keeping more inventory on hand in order to avoid shortages.  Goods need to reach consumers faster, as well as cut down on the transportation costs.  The amount of available industrial land for new warehouses near urban centers fell over the past decade.  This adds to the pressure on supply of warehouses for larger buildings with higher ceilings and adequate parking that will accommodate e-commerce fulfillment centers.   In turn, this will push more development out to secondary markets.

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References………………………………..

Jennifer Smith, WSJ, 6/23/2021

 

 

 

 

 

 

 

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