Warehousing Vacancies At An All-Time Low

The early phases of supply chain management modernization have pushed tenancy in U.S. industrial properties over 300,000 square feet. The push, according to Colliers International Group Inc., is led by wholesalers and retailers looking to expand their eCommece capacity.

“ECommerce, which saw sales grow 15 percent over the previous year in the first quarter of 2016, is propelling a supply chain overhaul for retailers and wholesalers seeking to keep up with the demand for rapid delivery,” said Dwight Hotchkiss, a Colliers executive. “This overhaul often involves relocation and consolidation of multiple warehouses into larger state-of-the-art facilities near population centers, ports and major intermodal facilities suitable for reaching consumers quickly.”

Leasing is notably up in the first half of 2016, according to Collier’s data — up 10.7 percent year over year. Rents are accordingly up, with demand spurring a 13.1 percent rise in effective rents to $4.77 per square foot per year.

Colliers is also predicting demand will continue to outpace demand for the rest of the year, given market conditions, which means rents could be returning to pre-recession highs in some markets. Atlanta, Chicago, Dallas-Fort Worth, Greater Los Angeles, New Jersey and Eastern PA have all seen particularly large upswings in demand matched with shrinking availability.

Vacancy rates are down a stunning 84 percent, on average, across Colliers-tracked markets, with only 6 percent currently vacant (the lowest rates since data started being gathered on the subject).

The good news for retail players? The big gap between supply and demand may be on track toward rectifying itself, given the sharp uptick in warehouse space construction that has also been a theme of 2016.

“With a record 204 million square feet now under construction,” the report concluded, “development is not likely to ease any time soon, as low vacancies continue to drive development across the country.”