The boom in retail sales in the United States also has driven a boom in the demand for warehouse space near seaports, according to the industrial real estate services firm CBRE.
The result is that industrial markets at major U.S. port cities have come under additional strain, fueling demand for warehouse space in markets with already scant availability, the company says.
Retailers are seeking to bolster their inventories in the wake of pandemic-related demand and global supply chain shocks like the recent blockage of the Suez Canal.
West Coast ports such as Long Beach and Los Angeles have seen the biggest surge, with year-to-date loaded imports increasing 32.1% and 24.2%, respectively. On the East Coast, experiencing significant increases as well were Savannah (17.7%), Port of Virginia (16.8%) and the Port of New York and New Jersey (13.2%).
This activity has increased demand for warehouse space in seaport markets, pushing down their average vacancy rate to 3.6% at the end of 2020, one percentage point lower than the national average. Low availability may persist for some time. Only 75 million sq. ft. is under construction in these markets, with more than a third preleased. All of this equates to rental rates hitting record highs.
Retailers and manufacturers learned to build-up a healthy safety stock to limit supply chain disruptions, according to John Morris, leader of CBRE’s Americas Industrial & Logistics business.
“While this will help protect consumers, it has put a strain on seaport industrial markets, as they need more supply to meet this surging demand,” he says. “Without more construction, we will see rental rates continue to soar.”