Demand from mass merchandisers for logistics facilities at all-time high, according to JLL. Shift from in-person buying to online buying is driver for demand.
Demand for Warehouse Space Off the Charts
According to the commercial real estate services firm JLL, demand for logistics facilities to first store inventory and then pack and ship that inventory to consumers is going through the roof.
For years, Amazon was basically the only customer interested in warehouse space for its inventory and the logistics needed to get that inventory to consumers. Now, due to the COVID pandemic “encouraging” consumers to shift their buying preferences from in-person/store shopping to online shopping, large merchandizers like Walmart, Target and Costco are essentially playing “catch-up.”
Demand for Logistics Facilities Unprecedented
Demand for logistics facilities in key markets such as Columbus OH and Savannah GA is jaw dropping. That unprecedented demand is now spilling over to more densely populated areas including New York City. Craig Meyer, president of JLL’s Americas industrial division, said, “…(this) long-term journey of shifting consumer behavior from buying in stores to online…is the existential driver for demand…” with mass merchandise leading that demand.
JLL is forecasting that demand for industrial real estate in Columbus OH (where nearly 50% of the nation’s population is within a one-day drive) will surge +61% y/y in 2021. Demand for industrial real estate in Savannah has already grown nearly 10M square feet in the last year to handle increased container volume coming into the port of Savannah..
Meyer added, “Cargo is shifting towards the East Coast…There are a lot of companies looking to get there as a staging point now, as (containers) come off the boat.”
Nationwide, “Taking” Rents Increasing Faster than “Asking” Rents
According to data from the real estate firm CBRE, “taking” rents, the base rents landlords and tenants agree to, have risen +9.7% y/y for industrial real estate in the first five months of 2021. “Asking” rents have “only” increased slightly over +7.1% y/y.
Meyer with JLL said that these industrial taking rents are equal to office building rents.
Disconnect Between Supply and Demand
Prologis, the biggest US owner and manager of logistics real estate by square footage, sees the same disconnect between supply and demand in industrial real estate as there is in residential real estate. Chris Caton, head of the Prologis research group, said that this unprecedented demand for logistics facilities is “…against a backdrop where there’s very high (supply) scarcity…Vacancy rates in the US are 4.5%, basically 40-year lows. There has never been less available to lease, at a time when customers really, really need it.”
Thanks to JLL, CBRE, Prologis and cnbc.