Demand continues to outpace a four-year surge in warehouse development—much of it speculative—and allay any fears about overbuilding.
There currently is more than 255 million sq. ft. of warehouse space under construction, 70.2% of it on spec. Since 2015, however, warehouse demand has outpaced new warehouse completions by 169 million sq. ft. and rents have increased by 19.2%, according to CBRE Econometric Advisors.
Five of the top 10 markets for speculative development have market conditions that justify adding more big-box warehouses: vacancy rates below or slightly above the national average (4.4%) and aggregate net asking rent growth of 7.8% annually.
The remaining five markets were well above the national vacancy average and their aggregate rent growth averaged 4.6% due to more available supply. With demand not likely to diminish, speculative big-box developments in those five markets are expected to lease up shortly after completion. E-commerce, food & beverage, wholesaler and third-party logistics users, which have dominated pre-leasing activity, are the best candidates to occupy these new modern warehouse facilities.
Figure 1: U.S. Warehouse Space Under Construction
Source: CBRE Econometric Advisors, Q1 2019.
Figure 2: Top-10 Markets for Speculative Warehouse Space Under Construction, Q1 2019
Source: CBRE Econometric Advisors, CBRE Research, Q1 2019.
Larry W. Genet is a Senior Vice President in the CBRE, Inc. Miami, FL office. As part of the CBRE platform Mr. Genet can provide a wide range of services from local to Fortune 1000 clients including agency and tenant representation, asset or portfolio management, high level logistics, labor and data analytics prior to site selection, project/construction management, capital markets, owner user sales and valuation advisory services. CBRE is the global leader for real estate services worldwide.
Larry has extensive experience in landlord agency, tenant representation, acquisitions, dispositions and property management. As a third-generation commercial real estate professional and South Florida native, Larry boasts deep community ties, an intimate knowledge of the South Florida market and numerous professional contacts. Larry’s leasing expertise of industrial, office, land, retail and medical properties coupled with his experience in acquisitions and dispositions gives him the ability to represent a myriad of clients in the South Florida market. Additionally, Larry controls a portfolio of 13.5 million square feet allowing him to see every deal in the market. This ensures his clients never miss an opportunity. His knowledge of tenants and buyers in the market is top notch and when coupled with his team's vast portfolio, it's a winning combination.
