Colliers International says supply chain modernization and ecommerce continue to drive growth of big box warehousing, which is experiencing a record number of tenants.
In its mid-year report, the global commercial real estate firm said only 157 of 1,908 existing buildings are vacant across six core markets examined, and a record 98 big-boxes, totaling 60 million square feet (MSF), were added over the past year.
Colliers says demand for larger, modern spaces created record-setting fundamentals in Q2. During the year’s first half, leasing increased by 10.7% year over year, with demand spurring a 13.1% rise in effective rents to $4.77 per square foot per year.
“Ecommerce, which saw sales grow 15% over the previous year in the first quarter of 2016, is propelling a supply chain overhaul for retailers and wholesalers seeking to keep up with the demand for rapid delivery,” said Dwight Hotchkiss, national director, industrial for the U.S.
“This overhaul often involves relocation and consolidation of multiple warehouses into larger state-of-the-art facilities near population centers, ports and major intermodal facilities suitable for reaching consumers quickly.”
At mid-year only 6% of the nation’s industrial space is vacant, the lowest rate on record. Vacancies dropped despite 63 MSF of new supply that was completed in Q2, breaking the previous record of 60 MSF set just last quarter.
More than 77 MSF was absorbed, surpassing the previous record of 72 MSF in Q2 2015.
With a record 204 MSF now under construction, Colliers says development is not likely to ease any time soon while low vacancy rates continue to drive development across the U.S.
Strong leasing and lower vacancies, especially in modern Class A distribution centers, drove up asking rents in Q2 to $5.66 PSF/year, an all-time national record in the United States. Asking rents for distribution space increased year-over-year in 87% of the markets Colliers tracks.