Warehouse space hasn’t been this tight since the dot-com boom

Availability nationwide dropped to 7.2 percent in the second quarter

Los Angeles /
Jul.July 11, 2018 11:00 AM
Warehouse space (Credit: MaxPixel)

Warehouse space is at its tightest level since the first dot-com boom, and it’s driving tons of business.

The second quarter saw availability fall to 7.2 percent, the lowest level since 2000, as demand continues to outpace supply, according to CBRE data first reported by the Wall Street Journal. Availability has now dropped for a record 32 straight quarters.

Experts largely attribute the fall-off to growing demand for space as e-commerce grows. That’s prompting some owners to expand the scope of their operations, including by adding so-called last-mile delivery operations to their properties.

The demand is driving prices to record highs, particularly for distribution centers in urban areas. Los Angeles’ South Bay submarket, an industrial hub near the Ports of Los Angeles and Long Beach and Los Angeles International Airport, is seeing rental and sale prices for Class B properties rise to Class A levels as tenants and investors jostle to get a foot in the door.

The average price per square foot in New York has grown as by as much as 81 percent in some areas. Nationally, industrial sales volume by dollar amount has doubled since 2012, according to data from PwC and the Urban Land Institute.

The tight warehouse market has produced strong returns for industrial real estate investment trusts. Last year returns for REITs were 24 percent, higher than the single-digit returns in other sectors.

Blackstone has taken notice and spent more than $10 billion buying industrial REITs and properties, including a $7.6 billion purchase of Gramercy Property Trust.

But not everyone is hot on industrial. Sam Zell, the notorious doomsayer, vulgar septuagenarian, and Equity International founder, thinks that developers are building too much and that it will outpace demand.  [WSJ] — Dennis Lynch


Related Articles

arrow_forward_ios
Richard Lovett, co-chairman / agent, motion picture library literary, CAA (CAA)
CAA picks JMB Realty’s new Century City tower for HQ
CAA picks JMB Realty’s new Century City tower for HQ
Kevin Staley, managing partner, Staley Point Capital; Andrew Terris, managing director, real estate, Bain Capital; and view of 12065 Pike Street (Google Maps, Bain Capital, Staley Point)
Staley Point, Bain spring for beer bash
Staley Point, Bain spring for beer bash
Rexford Industrial Realty co-CEOs Michael Frankel and Howard Schwimmer and property at 4240 West 190th Street (Wexford Industrial Realty, Newmark)
Rexford’s latest in South Bay brings 307K sf
Rexford’s latest in South Bay brings 307K sf
Microsoft CEO Satya Nadella, Activision Blizzard CEO Bobby Kotick and 2701 Olympic Boulevard (Wikipedia, Loopnet)
Here’s how Microsoft will expand its SoCal office footprint with Activision
Here’s how Microsoft will expand its SoCal office footprint with Activision
11672 San Vicente Boulevard in Brentwood (Google Maps)
Brentwood retail complex fetches $2,000 psf
Brentwood retail complex fetches $2,000 psf
9710 Zelzah Avenue with NMS Properties' Neil Shekhter and Bascom's Derek Chen (top right), David Kim (bottom right) and Jerry Fink (bottom left) 
Shekhter sheds two SF Valley properties for $52.5M
Shekhter sheds two SF Valley properties for $52.5M
The Mix at Harman Campus at 8500 Balboa Boulevard with Shubin Nadal Realty Investors' Bill Shubin and Lonnie Nadal (Shubin Nadal Realty Investors)
44-acre business campus in San Fernando Valley for sale
44-acre business campus in San Fernando Valley for sale
From left: Peter Borzak, CEO, Pine Tree; Todd Minnis, CEO, EB Arrow; 106 South Brand Boulevard (LoopNet, Pine Tree, EB Arrow)
$64M deal for Glendale retail center bodes well for big-box
$64M deal for Glendale retail center bodes well for big-box
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...