As Predicted in 2018 A/E/C Firm U.S. Market Forecast, Warehouses Are On A Roll

In ranking “Industrial/Warehouses” as the strongest market of the 41 assessed, the PSMJ 2018 A/E/C U.S. Market Forecast stated, “All the latest retail trends – skyrocketing use of ecommerce, last-mile delivery, robotics and so on – leave the warehouse sector woefully undersupplied. Best market hands down and it should last a while.”

This was borne out recently in a June 2019 report released by real estate company CBRE. It noted, “Demand continues to outpace a four-year surge in warehouse development—much of it speculative—and allay any fears about overbuilding. There currently is more than 255 million sq. ft. of warehouse space under construction, 70.2% of it on spec. Since 2015, however, warehouse demand has outpaced new warehouse completions by 169 million sq. ft. and rents have increased by 19.2%,” according to CBRE Econometric Advisors.

CBRE reported that 5 of the top 10 markets for speculative development have market conditions that justify adding more big-box warehouses: vacancy rates below or slightly above the national average (4.4%) and aggregate net asking rent growth of 7.8% annually. So the boom is unlikely to end any time soon.

The remaining five markets were well above the national vacancy average and their aggregate rent growth averaged 4.6% due to more available supply.

“With demand not likely to diminish, speculative big-box developments in those five markets are expected to lease up shortly after completion. E-commerce, food & beverage, wholesaler and third-party logistics users, which have dominated pre-leasing activity, are the best candidates to occupy these new modern warehouse facilities,” the report concluded.

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