New warehouse leases boosted by inflation, supply chain crisis

Industrial lease prices up 25 percent from expiring five-year deals

New York /
Dec.December 06, 2021 04:00 PM

Inflation is boosting new warehouse lease prices, according to CBRE data (iStock)

As inflation woes roil the economy at large, industrial real estate players are reportedly seizing on new contracts to pass on the increased costs.

Prices for industrial property leases are up 25 percent on average compared to five-year lease contracts that expired in 2021, according to CBRE data reported by the Wall Street Journal. The increases stem from global supply chain issues wreaking havoc on landlords and developers.

After e-commerce activity and demand for logistics space surged in the wake of the pandemic, customers are picking up retailers’ costs from growing warehouse rental rates, in addition to price hikes in shipping and raw materials, the Journal reported.

The increases feed into inflation, which has seen an annual rate above 5 percent for five straight months; the Consumer Price Index rose 6.2 percent in October, the highest jump in 31 years.

The e-commerce boom has pushed industrial real estate to new heights, including a record-shattering third quarter that marked 159 million square feet of net absorption, according to a report from Transwestern. It was the highest quarterly total since 2008.

Vacancy rates across the country fell to 4.7 percent. That figure was even lower in California’s Inland Empire and New Jersey’s Orange County, which recorded only 3 percent. Meanwhile, industrial asking rents hit a quarterly high of $7.11 per square foot, according to Transwestern.

CBRE also noted that the rents to replace expiring leases were much higher than those from five years ago in several key markets. The Journal noted in the Inland Empire, central New Jersey and Philadelphia, rates were more than 60 percent higher than in 2016.

Inflation problems may not be going away anytime soon. Federal Reserve Chairman Jerome Powell recently expressed a desire to stop using the term “transitory” when describing the rising prices facing consumers.

[WSJ] — Holden Walter-Warner





    Related Articles

    arrow_forward_ios
    Inmobiliaria Brom’s Ariel Bromberg and render of Onyx Tower (Inmobiliaria Brom, Linkedin)
    Lease roundup: Industrious inks at Onyx in Hallandale Beach
    Lease roundup: Industrious inks at Onyx in Hallandale Beach
    Amir Korangy, Michael Shvo and Jeff Greene
    Michael Shvo and Jeff Greene talk distress, opportunities in office
    Michael Shvo and Jeff Greene talk distress, opportunities in office
    From left: Bridge Industrial’s Steve Poulos and Kevin Carroll along with 16175 Northwest 49th Avenue and 16175 Northwest 49th Avenue in Miami Gardens (Bridge Industrial, Getty)
    Bridge bets on Miami Gardens’ Palmetto Lakes Industrial Park
    Bridge bets on Miami Gardens’ Palmetto Lakes Industrial Park
    Terranova’s Stephen Bittel with 93 Miracle Mile
    Terranova plans retail-and-office project on Coral Gables’ Miracle Mile
    Terranova plans retail-and-office project on Coral Gables’ Miracle Mile
    Ytech's Yamal Yidios with 1500 Brickell Avenue
    Ytech buys historic Brickell château, plans restoration
    Ytech buys historic Brickell château, plans restoration
    50 and 60 Northeast Third Street and 222 and 234 Northeast First Avenue (Google Maps)
    Namdar pays $41M for downtown Miami apartment towers dev site
    Namdar pays $41M for downtown Miami apartment towers dev site
    Hollywood Locations' Christopher Ursitti and 1400 Northwest 31st Avenue (Hollywood Locations, Google Maps)
    Movie studio complex may rise on former incinerator site in Fort Lauderdale
    Movie studio complex may rise on former incinerator site in Fort Lauderdale
    Link Logistics' Luke Petherbridge (Link Logistics, Calder Casino, iStock)
    Take two: Blackstone affiliate proposes industrial complex with movie studio at Calder’s horse racing track
    Take two: Blackstone affiliate proposes industrial complex with movie studio at Calder’s horse racing track
    arrow_forward_ios

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

    Loading...