Distribution firms want to be close to major air hubs to expedite speedy deliveries, but there often is a premium price to pay.
According to the real estate services company CBRE, industrial rent premiums average 13% in the top U.S. airport submarkets and reach as high as 47% in the No. 1 submarket of Chicago O’Hare.
In the era of next-day delivery, third-party logistics firms, ecommerce companies and retailers are all vying for industrial space with proximity to major airports. These companies appear willing to pay a premium for this coveted, but limited supply real estate to meet customer needs for rapid order fulfillment.
Third-party logistics firms are the main drivers of this activity, accounting for 29.6% of activity in major airport submarkets, followed by general retail and wholesale (24.4%) and pure-play ecommerce-only companies (16%).
“As ecommerce providers and retailers compete to offer faster delivery times, air freight will increasingly be a key component of distribution strategy,” says John Morris, executive managing director and leader of CBRE’s Americas Industrial & Logistics business.
Rent for warehouses and DCs around major air cargo hubs should continue to rise, especially in markets where there is limited development space, he stresses. “Customers today expect fast delivery, but there is a cost associated with leveraging air transportation for ecommerce delivery.”
The submarkets with the highest rent premiums are seen in Chicago O’Hare (47.1%), Oakland (32%), Dallas/Fort Worth airport (22.1%), Los Angeles County South Bay (12.9%) Inland Empire/Ontario, CA (12.2%), and the Atlanta airport (7%).