Dive Brief:
- Industrial real estate markets are seeing low vacancies and high rents, according to the North American Ports Report from Cushman & Wakefield.
- Some industrial markets near port-adjacent areas are seeing more than 11% rent increases year-over-year. Vacancy rates were also low, particularly in Los Angeles, Vancouver, Savannah, Georgia and the state of New Jersey.
- North American ports handled a record volume of over 13.8 million TEUs handled year-to-date, according to the report. Experts say there is no signs of slowing down.
Port-adjacent markets see high demand for industrial real estate
Dive Insight:
Companies are holding more than the usual inventory to prepare for the peak season, which causes less warehouse space to become available.
"People really want their stuff, so we're seeing an extreme demand for warehouse product," said Carolyn Salzer, Americas head of logistics & industrial research at Cushman & Wakefield.
Big Lots, Lowe's and Best Buy are all taking action to expedite inventory for the holidays as demand for space to store inventory dedicated to e-commerce only increases.
With consumer demand increasing, record volumes at the ports causing delays and record-high ocean freight rates, shippers still need to find where to place their shipments.
Growth in e-commerce is pushing companies to lease more space near ports, where products can be stored before they're shipped to customers.
"By ordering things online, instead of just picking it up at the store, it doesn't just sit in the store. It needs to be in a in a warehouse, in a facility, that holds on to it until some of us order it," said Salzer.
"Companies are leasing space at record level to handle the large increase in e-commerce sales in the first half of 2021," said CBRE in the company's Q2 U.S. Industrial and Logistics Figures.
To combat high rental rates, retailers have turned to on-demand warehousing and other short-term contracts. On-demand warehouse provider Flexe, for example, saw demand for its services grow 128% YoY in 2020.
If companies are unable to find space, or are looking to avoid rising rates, they may have to turn to other solutions.
"As vacancy rates drop and rents continue to rise in these areas, tenants must obtain space further from ports to store the influx of product coming in," according to the ports report.
