CBRE: ‘Voracious’ Demand for E-Commerce Industrial Centers
Voracious global demand for e-commerce fulfillment and distribution centers fueled a 2.8 percent year-over-year increase in prime logistics rents globally–led by double-digit gains in U.S. coastal markets–reported CBRE, Los Angeles.
CBRE’s Global Prime Logistics Rents report said U.S. cities made up six of the top 10 markets with the fastest-growing prime logistics rents worldwide, led by Oakland, Calif.’s nearly 30 percent gain.
“Global consumer demand is strong, and an ever-increasing share of retail sales are taking place online,” said CBRE Global Chief Economist Richard Barkham. “That is prompting traditional retailers, e-commerce companies and third-party logistics firms to seek out advanced ‘prime’ logistics warehouses to modernize their supply chains and thus facilitate the rapid delivery of goods.”
Barkham said growth in prime logistics rents in the Americas (up 5.6 percent) outpaced Asia (up 2.5 percent) and the Europe, Middle East and Africa region (up 0.8 percent) last year. He defined prime rents as the highest achievable rents for a highest-quality logistics facility.
CBRE Head of Industrial and Logistics Research David Egan said developers cannot keep up with demand. “Therefore, industrial occupiers should expect to see rents rising for a while longer,” he said.
American seaports and inland ports posted the largest worldwide gains in 2015 due mostly to the increasing flow of goods into and throughout the region from online sales, CBRE said. In addition to Oakland in the No. 1 spot, other fast-growing U.S. markets for prime logistics rents include New Jersey at No. 2; California’s Inland Empire at No. 3; Los Angeles-Orange County at No. 7; Dallas-Fort Worth at No. 8; and Atlanta at No. 9.
U.S. coastal markets drove the sharp rise in prime rents in the Americas, CBRE reported. “Relentless occupier demand drove up pricing,” the report said. “In Oakland, desire for quality premises is the dominant factor for inner-bay logistics users despite the high cost. New development in some markets, such as the Inland Empire, is commanding premium rates.”
Much of the upward rent pressure in American logistics markets comes from a supply chain “arms race of sorts” among retailers, shippers and suppliers seeking to accommodate e-commerce growth, CBRE said. “In heavy demand are modern distribution centers and fulfillment centers with features such as a high loading dock ratio and clear ceiling heights of at least 26 feet to accommodate high-tech stacking racks and automated storage-and-retrieval systems. Many such facilities are being built close to large population centers, where land costs are high.”
