Dive Brief:
- Real estate developers in suburban Long Island and New Jersey are dismantling offices in favor of warehouses, thanks in part to delivery proximity to nearby ports, highways and New York City, The Wall Street Journal reported Sunday.
- Low industrial vacancy rates have driven up the value of warehouses. In Long Island, for example, warehouse space sells for $96.80 per square foot whereas it sold for $62.50 per square foot in 2013.
- In contrast to the 1.8% and 4.6% industrial vacancy rates in Long Island and New Jersey, office vacancy rates are at 14.3% and 24%, respectively. The stark difference is making the switch from office to industrial space very profitable for developers.
Dive Insight:
The trends towards leaning inventory and just-in-time production, not just in the manufacturing space but also in the retail sector, was certain to have real estate repercussions.
A shift to just-in-time inventory does not mean the goods disappear, after all, but rather that the responsibility for storing excess materials shifts to the supplier and the external logistics provider. Add to that the across-the-board tightened fulfillment timelines spurred by e-commerce and the value of suburban warehousing spikes, regardless of location.
Long Island and New Jersey may have an added bonus due to their proximity to one of the world's largest cities, but industrial space is also booming nationwide. California and Colorado, for example are both currently witnessing the largest warehouse developments in their states' histories.
Colorado, Tennessee, Georgia and California are among the rising stars of logistics hubs, and they have the on-demand supply chain to thank.
