Warehouses move to the 'burbs as urban land prices skyrocket
- The need for e-commerce warehouse space across the U.S. has led to a major price increase in land plots of 50 to 100 acres, a doubling of cost from this time last year, according to CBRE research, CNBC reported Tuesday.
- Major markets such as Atlanta, Houston, California's Inland Empire, northern New Jersey, Chicago and Las Vegas are seeing both the highest prices and the most construction.
- Industry experts don't believe supply will align with demand anytime soon, despite an increase in warehouse or distribution center construction.
A dearth of affordable space may be causing the suburbanization of warehousing, especially as prices have ballooned from $200,000 per acre in 2016 to $250,000 per acre in 2017.
The availability of industrial real estate was experiencing a decline as early as 2016, when it fell to 8.7% during the first half of the year.
Areas like Pennsylvania's Lehigh Valley, with vast tracts of previously available farmland and easy urban access have already been developed, while former office space in or near cities is also being plundered for location and lower costs.
As prices rise and availability shrinks, e-commerce developers are moving inland, buying up long dead suburban malls and other locations.
Amazon, for example, has bought two former shopping sites near Cleveland, Ohio: the Randall Park Mall — once deemed the largest mall in America — and the Euclid Square Mall, located in a former suburb now riddled with blight.
The former Randall Park is estimated to bring with it roughly 2,000 new jobs, while Euclid Park is thought to bring closer to 1,000.
The pair bring the total number of Ohio's Amazon fulfillment sites to five, from which the company gains easy access to southern Michigan, eastern Indiana, western Pennsylvania (more than 200 miles from Lehigh Valley) and northern West Virginia.
Though perhaps serving a less dense population than its older east or west coast sites, Amazon is achieving deeper market saturation with its moves to the suburbs, while simultaneously saving millions in real estate costs.
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