Multi-Use Logistics Primed for Growth
JLL, Chicago, said one industrial real estate sub-class is particularly well-positioned for growth: multi-use logistics.
JLL defines multi-use logistics properties as 20,000- to 100,000-square-foot multi-tenant industrial buildings in dense infill locations. Because they are often older properties, population centers have grown around them, making multi-use logistics properties nearly impossible to replace and highly sought-after as last-mile logistics locations close to end users.
Increasing demand for these smaller industrial assets has significantly dropped their vacancy rates nationwide to well under 9 percent. Multi-use logistics buildings often contain distribution, flex showroom, industrial showroom, R&D, warehouse or manufacturing space.
“The long-term outlook for multi-use logistics is strong, with clear industry momentum from ‘fabric of society’ tenants and growing investor demand for this sub-class,” said JLL Senior Managing Director John Huguenard, who co-heads the firm’s Industrial Capital Markets group. “With new yield-focused investors entering into the industrial space, small bay product is desirable as an alternative to the ever-tightening bulk industrial market.”
In a new report, Multi-Use Logistics Rediscovered, JLL said it anticipates a nationwide 4.6 percent rent growth for triple-net-leased multi-use logistics between 2021 and 2024, compared to 3.7 percent for the entire property sector.
“This sub-class has huge potential upside on rent growth driven by low vacancy and limited new supply,” Huguenard said, noting multi-use logistics rent has grown more than 54 percent since 2010 and nearly 21 percent since 2017, outpacing the national average for the broader industrial market.
Adding to the sub-class’s advantages: a lack of new construction. Construction activity for multi-use logistics properties has hovered between 0.1 and 0.3 percent of existing inventory this cycle, significantly below the national average of 1.6 percent. With little new product entering the market and increasing pressure from rising land-values to redevelop for other uses, tenants have very limited options outside their current space, constraining vacancy nationwide.
