DEMAND FOR WAREHOUSE and
distribution space is growing faster
in high-cost port cities and major
inland hubs than in secondary
markets, despite accelerating rents,
labor and land costs.
"If that's where the demand is,
that's where I want to be. Yields will
be higher," Chris Caton, senior vice
president of research at Prologis,
told the 18th Annual TPM Confer-
ence in Long Beach, California, on
March 6.
Seaport locations such as Los
Angeles-Long Beach and New
York-New Jersey and inland hubs
like Chicago and Dallas are experi-
Despite escalating costs,
shippers are opting for
warehouses and DCs
closer to major ports
By Bill Mongelluzzo
Jersey are up 11.5 percent to $8.14.
One important reason why
proximity to distribution hubs and
population centers is more import-
ant than real estate prices is the in-
creasing cost of transportation, said
Michael Murphy, chief development
officer at CenterPoint Properties.
Until recently, transportation costs
were 10 times the cost of real estate,
but now it's more like 13 to 14 per-
cent, he said.
Increasing drayage costs and
worsening driver shortages since
the roll-out of the federal electronic
logging device (ELD) mandate in
December are forcing transportation
prices higher. The April 1 enforce-
ment of the ELD requirement is
expected to accelerate this trend be-
cause drivers no longer will be able
to adjust their log books to make it
appear they are adhering to federal
hours-of-service requirements.
With an aging driver force and the
difficulty drayage companies have
attracting young drivers, warehouse
operators' ability to ensure access
to sufficient truck capacity is more
Location trumps price
encing especially rapid demand for
industrial development, because of
a convergence of traditional import
distribution activities and last-mile
e-commerce fulfillment. Vacancy
rates are low, rents are increasing
steadily, and a shortage of ware-
house workers and truck drivers
are pushing labor costs higher at a
faster pace than in secondary inland
population centers. As a result, US
industrial rents increased 9 percent
last year, but rents increased 15 per-
cent at locations close to ports.
A Cushman & Wakefield analysis
of 13 major seaport industrial real es-
tate markets found that the seaport
locations accounted for 28 percent
of net absorption in the fourth
quarter of 2017. The average vacancy
rate was 3.5 percent, compared with
5.1 percent for the US market as a
whole. Industrial real estate rental
rates can be tracked on the JOC Ship-
ping & Logistics Pricing Hub, which
shows that rents in Los Angeles have
risen 6.7 percent from the fourth
quarter of 2016, to $9.60 per square
foot, while rents in northern New
JOC Guide to Warehousing and Industrial Real Estate Special Report
18 The Journal of Commerce
|
April 2 2018 www.joc.com
