Dive Brief:
- The availability of industrial real estate fell to its lowest level since 2000 with only 7% of space available, according to a report from CBRE.
- Demand for warehouse space was 6.2 million square feet greater than supply in the fourth quarter of 2018. This is down from a demand-supply gap of 9.3 million square feet in the third quarter.
- In 2018, the demand for warehouse space exceeded the supply by a yearly total of 29 million square feet.
Dive Insight:
The fourth quarter of 2018 marked the 34th consecutive quarter of declining industrial real estate availability.
This lack of space is being driven by the boom in e-commerce and a generally strong U.S. economy, according to Richard Barkham, CBRE Global Chief Economist.
"While factors such as higher interest rates and trade-protection worries are headwinds, the U.S. industrial real estate market will continue to draw momentum from the healthy U.S. labor-market, brisk import activity aided by the strong dollar and robust consumer confidence," Barkham said in a statement.
But the struggle doesn't end with finding available warehouse space. Companies are in need of space that can handle the needs of a large-scale e-commerce model. However, only 11% of warehouse space was built in the last decade, and the remaining space might not be up to snuff for modern day demands.
Construction crews were able to finish 57 million square feet of warehouse space in the fourth quarter of 2018, according to CBRE.
This boom in e-commerce isn't just eating up available land, but also the available workforce. The transportation and warehousing sector attracted 731,000 employees from other sectors between 2011 and 2015, according to a report from CBRE from last year.
Barkham told The Wall Street Journal he expects warehouse space to remain limited throughout 2019. But there are signs this could be changing. Retailers are keeping a close eye on trade talks between the U.S. and China, which could play a role how the economy performs in the coming year, according to the National Retail Federation. A report from JLL specifically said these worries could carry over into less demand in the industrial real estate sector, The Wall Street Journal reported.
