Digital Edition

January 2 2023

Issue link:

Contents of this Issue


Page 105 of 131

104 Journal of Commerce | J anuar y 2, 2023 Logistics To the raers Tight supply to keep warehousing costs rising despite slower freight growth By Bill Cassidy Inland Empire was just 0.6 percent. And demand for warehousing space was still growing. A look ahead: Industrial developers are racing to keep up with demand in 2023. A CBRE survey in November found 64 percent of respondents were looking to expand warehousing, with 47 percent planning to expand facilities by more than 10 percent. Eighty-one percent of third-party logistics companies surveyed by CBRE said they plan to expand their footprints over the next three years, along with 75 percent of both food and beverage and building materials and construction companies and 52 percent of retailers and wholesalers. The survey results reflect not just increased demand for goods, but long-term distribution changes that require more facilities closer to cus - tomers. Logistics real estate specialist Prologis expects the pace of US ware- housing expansion to slow in 2023 as buildings still in the construction pipeline are completed, capital costs rise, and the US economy slows, but capacity isn't going to suddenly flood the market. Prologis has forecast the US vacancy rate to rise to about 4 percent in 2023, but that would still be well below the long-term average of 6.4 percent. A new normal: In a word, the new normal for the US warehousing sector is "busier." Propelled by still-booming e-commerce growth and result- ing changes to supply chains and distribution networks, warehousing will remain a physically larger and more critical part of supply chain and inventory management in the 2020s than it was prior to the COVID-19 pandemic. JOC email: twitter: @willbcassidy that weren't always in the right loca- tions, a type of "distribution disloca- tion." The JLL average warehousing and storage vacancy rate in the third quarter was 3.7 percent, and average asking rents stayed at historic highs of more than $8 per square foot. Chicago, Southern California's Inland Empire, eastern and central Pennsylvania, Atlanta, and Los Ange- les dominated the industrial space market, accounting for more than 40 percent of all leases signed through- out the US in 2022, according to JLL. The third-quarter vacancy rate in the A look back: Last year, many ware- house providers simply ran out of space. The overall US industrial vacancy rate hit an all-time low of 3.3 percent in the third quarter of 2022, according to data from indus- trial developer JLL. Shippers pulled a large portion of imports that would normally ship during the summer and fall months forward into the first half, rapidly filling available storage near seaports and in inland markets, snarling intermodal supply lines, and causing massive headaches for importers and third-party logistics companies. By the end of the third quarter, vacancy rates had fallen for seven consecutive quarters and there was 633 million square feet of industrial space under construction, according to JLL. The big problem as the fourth quarter began wasn't just bloated inventories, but inventories In a word, the new normal for the US warehousing sector is "busier." The US industrial real estate vacancy rate fell to a record low of 3.3 percent in Q3 2022. The big picture: If there's one link in US supply chains where capacity is still extremely tight, it's the warehousing sector. That isn't likely to change much this year. Freight growth may be slowing, but vacancies were at an all-time low in 2022 and the rising cost of capital could blunt investment in new space in 2023, which means capacity will likely remain tight and rents will stay elevated heading even into 2024. In the longer term, surveys by real estate developer CBRE show companies still plan to expand warehousing to meet long-term market changes that will survive a 2023 recession. ANNUAL REVIEW & OUTLOOK 2023

Articles in this issue

Links on this page

Archives of this issue

view archives of Digital Edition - January 2 2023