 US warehouse development shifting from e-commerce back to import logistics |
Source |
American Shipper |
Post Date |
05/27/2021 |
|
While construction of US warehousing supporting e-commerce has leveled off, industrial real estate developers are focused on adding capacity for traditional logistics and import distribution activities, according to JLL¡¯s Q1 industrial outlook report.
¡°With congestion at major ports continuing to be a lingering strain on the supply chain as the economy pushes into the post-pandemic world, we anticipate demand from the logistics and distribution industry to continue to rise,¡± the Chicago-based real estate services firm said in the report.
The overall US industrial real estate sector, including third-party logistics (3PL), brick and mortar retailers, e-commerce fulfillment and food and beverage distribution, recorded a record-high first quarter net absorption (space occupied minus space vacated) of 85.6 million square feet. The average vacancy rate for industrial property across the US was 5.2 percent for the quarter, the same as in Q1 2020. Rents averaged $6.57 per square foot, up 7.4 percent year over year.
E-commerce and last-mile delivery were the leading drivers of leasing activity in 2020, but this year, increased demand for space to handle more traditional inbound freight will be the main driver of warehouse absorption, the JLL report said.
Demand for import storage and distribution space near major US seaports is so great that warehouse operators are asking each other if they have surplus space they can sublease through the peak shipping season this fall, said Scott Weiss, vice president of business development at Whiplash, formerly known as Port Logistics Group.
Unsurprisingly, the locations with the lowest industrial vacancy rates in Q1 were near the two largest import gateways in the country: New York City, New Jersey, Southern California¡¯s Inland Empire, Los Angeles, and Orange County. Those vacancy rates ranged from 1.9 percent to 3.1 percent. After 10 consecutive months of record and near-record US imports from Asia, demand for warehouse and distribution space in seaport-depent locations remains strong.
¡°Coming off a booming 2020, New Jersey is primed for another blockbuster year, as tenants continue to flood the market,¡± JLL said. Some 13.7 million square feet of industrial space was leased in the first quarter, that market¡¯s highest level ever, according to the JLL report.
Similarly, the Los Angeles industrial market posted its highest absorption figure since 2015, with a majority of the 1.7 million square feet that was delivered in Q1 having been pre-leased. Imports through the largest US port complex drove that market.
¡°The flow of product has been so significant that retailers and suppliers had to reconfigure their supply chains and take down additional warehouse space in Southern California to accommodate increased inventory levels,¡± JLL said.
The top markets for year-to-date net absorption of industrial space are Dallas-Fort Worth, the Inland Empire, Atlanta, Chicago and eastern and Central Pennsylvania. Those are also the top five markets for industrial space under construction, according to the report.
Although leasing for e-commerce purposes has leveled off, it remains strong. But developers in that sector are challenged by high land values, rising prices for steel, a lack of available space, and zoning restrictions, JLL said. Locations close to consumers are highly desirable, which has developers looking to redevelop abandoned industrial properties in urban core areas or convert properties to new mixed-use facilities, according to the
|
|
|
|
