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May 14 2018

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May 14 2018 | The Journal of Commerce 43 Surface Transportation regional distribution facilities. "The main point is the bigger the market, the bigger the demand," Tolliver said. Tight market conditions resulted in rising rents, with asking rents in the US up 5.4 percent year over year. Rents increased in 59 of the 79 mar- kets tracked by Cushman & Wake- field. Asking rents increased 7.1 per- cent in the South, 6 percent in the West, 4.9 percent in the Midwest, and 4.1 percent in the Northeast. Industrial real estate rents for major markets can be found on's Shipping & Logistics Pricing Hub. Demand for industrial space in the busiest markets won't diminish, Tolliver said. "There is no real sign of weakness, demand is so tight," he said. CBRE reached the same con- clusion in its first-quarter industrial report. CBRE listed the rent increase at 5.9 percent year over year, "well above the average 12-month growth of 3.8 percent during this cycle dating back to Q4 2011," CBRE stated. With 41 million square feet absorbed versus 35 million square feet delivered, the market's availability rate declined to 7.3 percent, compared to the fourth quarter of 2017; that's the lowest level since the first quarter of 2001. This marked the 32nd consecutive quarter of positive net absorption, the longest streak in almost 20 years, CBRE said. The industrial real estate boom US SHIPPERS ARE having a harder time securing warehouse and dis- tribution space and are having to pay more for it, as US industrial real estate vacancy rates dipped 0.1 percentage points to 5 percent in the first quarter, compared to 2017, while average rents rose 5.4 percent. "US industrial markets absorbed 56.9 million square feet in the first quarter of 2018, making it the fourth strongest start to a year in the past 30 years," Cushman & Wake- field stated in its first-quarter 2018 report on warehousing and manu- facturing leasing activities. A 16.4 percent increase in e-com- merce sales, versus 5.2 percent in retail and food sales, created strong demand for warehouse space devoted to last-mile or last-touch deliveries. E-commerce demand comprises more than 20 percent of industrial leasing activities today, Jason Tolliver, head of logistics and industrial real estate at Cushman & Wakefield, told The Journal of Commerce. Less than a decade ago, last-mile commerce de- mand comprised only about 5 percent of total industrial demand, he said. Demand for e-commerce-related properties was strongest in the major seaport regions such as Southern California and New York-New Jersey and inland transportation hubs such as Chicago, where demand is also the greatest for traditional import and will continue at least into 2019 because of the structural changes un- derway, Tolliver said. Growth of about 5 percent in containerized imports will drive the "old commerce engine" of import and regional distribution centers in seaport cities and inland population centers, and the "new commerce engine" of last-mile fulfill- ment, also located largely in coastal cities and inland hubs, will compound the growth in demand for property. These structural forces, plus the measured development of new properties in congested cities — because of rising construction and labor costs, zoning restrictions, and the sense of caution that developers still experience since the 2008-2009 recession — will prevent unbridled growth. "No one wants to get burned again," Tolliver said. However, growth in e-commerce last-mile activity is giving a second life to old, outdated industrial proper- ties in the major seaport and inland Low vacancy DC and warehouse vacancy rates slip again as e-commerce demands escalate By Bill Mongelluzzo Double-digit growth in e-commerce sales has created strong demand for warehouse space devoted to last- touch deliveries. 0% 2% 4% 6% 8% West Northeast Midwest South Rent increase Vacancy Warehousing vacancy vs rent rates Source: Cushman & Wakefield © 2018 IHS Markit First-quarter industrial real estate vacancy rates by US region vs rent per square foot of industrial real estate Trucking | Rail | Intermodal | Air & Expedited | Distribution

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