Businesses leased 70.1 million square feet of industrial space in the U.S. in the second quarter, the highest amount in more than three decades and an increase of 6% year over year, according to real estate brokerage Cushman & Wakefield cited by the Wall Street Journal.
The hot demand is pushing up rents: Cushman & Wakefield finds that industrial rents increased in 68 of 79 major U.S. markets, rising 4.1% overall year over year. In those in-demand markets, businesses have leased 132.2 million square feet so far this year and developers have opened 99.9 million square feet of new space, the Wall Street Journal reports.
Meanwhile, real estate brokerage company CBRE Inc. found warehouse availability declined to 8.8%, the 25th straight quarterly decrease. CBRE estimates that developers are on track to bring on some 150 million square feet of new warehouse space in the markets it studies, flat with last year. While that’s under 2006’s high of 213.5 million square feet, that rate should protect availability, the Wall Street Journal reports.
The rise of e-commerce and retailer's omnichannel efforts is evident in these reports of falling availability and rising rents, including in urban areas.
“The good economy and the change in distribution logistics has led to an increased demand,” said Jeffrey Havsy, CBRE’s chief economist in the Americas, told the Wall Street Journal. “Now it’s more about having the right products near the customer, and that means more points of distribution rather than a single point of distribution.”
Rent increases are especially keen in the areas most heavily served by same-day delivery companies, and it’s not clear how much wiggle room delivery startups—or even Amazon—have in the facing of such rapidly and steeply rising costs. Although many retailers have been ramping up their same-day or two-day delivery options, it’s not clear that customers are willing to pay what those services might really cost.
This record pace of rising warehouse non-vacancies could put yet another kink in the same-day delivery boom, which, at least for some startups, is beginning to deflate a bit in the face of ebbing venture capital interest.