The boom in industrial real estate construction won’t be ending anytime soon, its strength sustained by the explosive growth of ecommerce.
“Activity is robust in core industrial markets and expanding rapidly in secondary markets near inland ports and large population centers,” observes James Breeze, who is national director of industrial research, USA, for Colliers International.
“Retailers, wholesalers and third-party logistics companies are all scrambling to find space near these locations to gain competitive advantage and get products to consumers faster,” he adds.
The international commercial real estate company also took note that in the Third Quarter 5.7% of the nation’s industrial space was vacant, which was the lowest rate on record.
Vacancies dropped in 82% of the markets Cilliers tracks compared to the same time last year, despite 62 million square feet (MSF) of new construction completed in Q3, follwing record number in Q2.
“At the end of third quarter, 63% of the markets we track had more product under construction than at this time last year,” Breeze points out. “Overall, 216 million square feet is under construction in the U.S.— the most on record and 19% higher than this time last year.”
Because 50% of ecommerce supply chain costs come from freight transportation, distributors are willing to pay higher rents to locate near major population centers and in secondary markets near inland and sea ports to reduce transportation costs and improve efficiencies, Colliers says.
“The need for more warehouse space as a cost-savings measure, combined with the need to carry larger inventories in a competitive online sales environment, will keep demand for industrial real estate robust for the foreseeable future,” Breeze predicts.
