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Top National Distribution Center Real Estate Trends

by Josh Bays, on Feb 21, 2018 11:26:27 AM

One of the biggest challenges companies face when expanding their distribution footprint is the lack of available real estate product in favorable locations. Site Selection Group, a full-service location advisory, real estate and economic incentive services firm, monitors industrial activity in the United States. Over the past few years, warehouse inventory has diminished as corporate expansions outpace construction.

National industrial vacancy rates have been steadily declining

In the short period from 2008-2010 when the Great Recession was in full swing, national industrial vacancy rates peaked at close to 14%. Since then, rates have steadily declined and currently sit close to 7%. The following chart shows national industrial vacancy rates.

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National construction starts and deliveries have been steadily increasing

Over the last five years, national construction starts and deliveries steadily increased on an annual basis, but construction starts appear to have peaked at the end of 2016. Although deliveries are expected to keep pace for the near future, the constrained industrial real estate market will likely further tighten as deliveries taper off. The following chart shows national construction starts and deliveries by quarter.

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Construction activity is still active in the large population centers

Although industrial construction activity appears to be slowing on a national scale, there are still several very active markets. Construction activity seems to be correlated to high population centers to reduce delivery times to customers as the bulk of large industrial leases are e-commerce or retail fulfillment related.  The following interactive map shows the 40 markets with highest construction activity, and is shaded by average rental rates.


Top 20 industrial leases of Q4 2017

The following chart shoes the largest industrial leases in the United States during the fourth quarter of 2017. Interestingly, the most active construction market, Dallas-Fort Worth, did not land one of these projects.

Building Market SF Tenant Name
171 River Road Northern New Jersey 725,400 Best Buy
2203 Sherrill Dr* Charlotte 639,000 Geodis
3282 E Holmes Rd Memphis 615,000 Amazon.com
2027 Harpers Way* Los Angeles 559,000 Virco
LogistiCenter at Las Vegas Boulevard Las Vegas 546,480 LogistiCenter at Las Vegas Boulevard
Prologis Ports Northern New Jersey 540,000 Allied Beverage Group
Chino South Business Park - Bldg 8 Inland Empire (California) 534,390 NFI
Midland Logistics Center Atlanta 505,000 S&S Activewear
ProLogis Park Cranbury S - Bldg 2 Northern New Jersey 504,428 Home Depot
50-02 55th Ave Long Island (New York) 475,000 UPS
3680 Langley Dr Cincinnati 423,608 First Group Logistics
Atlas Industrial Park - 153 Gibbons Rd* Greenville/Spartanburg 422,000 The Recon Group
Location Optimization Ctr - LOC 8 Northern New Jersey 410,300 LG Electronics USA
Camp Creek 3201 Atlanta 404,700 CEVA Logistics
Mason Ranch Bldg 1 Houston 373,860 Rooms To Go
3910 Alto Ave Las Vegas 338,520 Lincoln Industrial Co.
9801 Blue Grass Rd Philadelphia 332,640 Dependable Distribution Service LLC
PARK130 - Bldg 1 Northern New Jersey 320,867 Rema Foods
Edwards Dr Indianapolis 320,000 Ken's Foods
1042 Fred White Blvd Nashville 312,000 Sumitomo Tires
Source: CoStar *Renewal      

 

Topics:Distribution CentersEconomic IncentivesReal EstateSite Selection GroupSite SelectionIndustrial

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