Warehouse Sector's Historic Construction Rate Supported by E-Commerce Demand: CBRE Report

Warehouse Sector's Historic Construction Rate Supported by E-Commerce Demand: CBRE Report
Tight Vacancy, Rent-Growth Trajectory Lead to 255M Sq. Ft. of In-Progress Construction Warehouse construction has reached unprecedented levels in the U.S. due to e-commerce demand, and conditions in many markets indicate that new supply can be leased up prior to construction completion or shortly thereafter, according to a new report from...

Tight Vacancy, Rent-Growth Trajectory Lead to 255M Sq. Ft. of In-Progress Construction

Warehouse construction has reached unprecedented levels in the U.S. due to e-commerce demand, and conditions in many markets indicate that new supply can be leased up prior to construction completion or shortly thereafter, according to a new report from CBRE.

In-progress warehouse construction in the U.S. totaled 255 million sq. ft. at the end of this year’s first quarter. That running tally entered record territory in 2015 and has steadily climbed since then as companies raced to expand their e-commerce distribution networks for close proximity to as many customers as possible.

Slightly more than 70 percent of warehouse space now under construction is being built on speculation, meaning that developers started construction before securing occupants for their buildings. National metrics support that approach. The national vacancy rate for warehouses is a thin 4.4 percent as demand has dramatically exceeded new supply in recent years, pushing rents up by 19.2 percent since 2015.

“E-commerce continues to expand into additional sectors like grocery and furniture, creating demand for distribution space that supports additional construction,” said Chris Zubel, a Senior Managing Director leading CBRE’s representation of Industrial & Logistics investors in the Americas. “Conditions will vary by market, but e-commerce demand has created a fundamental shift in the warehouse sector.”

CBRE’s report identifies five top markets for spec warehouse construction that offer below-average vacancy rates and strong rent growth: California’s Inland Empire, Los Angeles, Seattle, Las Vegas and New York/Northern New Jersey.

To read the full report, click here.

About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2018 revenue). The company has more than 90,000 employees (excluding affiliates), and serves real estate investors and occupiers through approximately 480 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.

Source: www.cbre.us