Demand for smaller warehouses is soaring as e-commerce and the push for faster delivery accelerates competition for industrial space close to major population centers, The Wall Street Journal reports.
Rents for U.S. warehouses of between 70,000 and 120,000 square feet rose by more than 33.7% over the past five years, to an average of $6.67 per square foot, according to real estate consulting firm CBRE Group Inc. Availability for such spaces plunged to 7.4%, from 11.3% during that same period, the biggest drop of any segment in the broader warehouse market.
By contrast, the cost to lease bigger industrial spaces of more than 250,000 square feet—including the big-box warehouses that have traditionally anchored retail and industrial distribution networks—grew by 15.6%. Overall industrial rents rose by 23.9% between the second quarter of 2014 and the second quarter of 2019.
More recently, businesses like Walmart and Amazon have been adding smaller fulfillment and distribution locations that put inventory closer to customers, who often expect items to be delivered in two days or less. Overall, U.S. industrial rents are expected to grow about 5% next year, says Matthew Walaszek, CBRE’s associate director of industrial and logistics research. The change will be driven by demand among transportation and logistics providers and retailers for light industrial sites and properties closer to urban areas than the traditional sprawling facilities so that they can meet those quick order fulfillment turns. Read the full story.
