Industry updates: E-commerce increasing demand for fast deliveries

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.

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%, CBRE found. Overall industrial rents rose by 23.9% between the second quarter of 2014 and the second quarter of 2019.

That puts pressure on logistics providers, retailers and other operators looking to secure space near key markets in the highly urban Northeast, the San Francisco Bay Area and cities such as Chicago, Los Angeles and Dallas, said Matthew Walaszek, CBRE’s associate director of industrial and logistics research. “There is less flexibility and higher pricing,” he said. “It’s really difficult for the smaller players.”

CBRE expects overall U.S. industrial rents to grow about 5% next year, Mr. Walaszek said, largely 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 in outlying areas.

Content reprinted from The Wall Street Journal, By Jennifer Smith Oct. 10, 2019, 6:00 am ET Read more…