Warehouse space availability continues to plummet
- The rate of available industrial real estate dropped by 10 basis points to 7.2%, declining for its 32nd consecutive quarter, according to a press release from CBRE.
- The press release asserts e-commerce growth as the reason for the continued decline, and noted "net absorption across the 55 markets tracked by CBRE amounted to 59 million square feet in the quarter."
- CBRE also found that the gap between supply and demand "narrowed to 22 million square feet the 12 months ended in June from 65 million square feet in the prior year."
Although the industrial real estate availability decline is likely to flatten, the industrial real estate boom is nowhere near its peak, despite supply catching up to demand. Rent prices are at all-time highs, and may continue to climb even higher before the availability decline bottoms out.
Part of the problem is not that there aren't enough warehouses; e-commerce companies, manufacturers and retailers are struggling to find the right kind of warehouse space to fit their needs.
According to a CBRE report from April, older, less tech-savvy warehouses with fewer amenities are clustered in urban areas, but companies want warehouses compatible with new technology. Thus, more of these modern warehouses are getting built farther away from urban areas with a high concentration of consumers.
But they are barely being built fast enough to meet demand.
The other problem is, these high-tech, modern warehouses are much bigger than they ever were before. Today's warehouses are 143% larger than they were in 2007. It takes longer to build them, and they're more expensive to rent, driving up the rates and adding pressure to the capacity crunch.
While supply will likely catch up to demand at some point, availability rates will continue their decline and rent prices will continue to skyrocket. With freight rates rising as well, supply chains may see a substantial spike in logistics-related costs over the next year.
Correction: A previous version of this story misstated the timeframe of declining available warehouse space.
- Supply Chain Dive 20th century warehouses not fit for 21st century e-commerce
- Supply Chain Dive The industrial warehouse space market is nowhere near its peak
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