The report said conditions in many markets suggest that new supply can be leased up before construction is complete or shortly thereafter.
Current in-progress warehouse construction in the U.S totaled 255 million square feet at the end of the first quarter of 2019, with 7 million square feet under construction in New York/northern New Jersey.
CBRE said that since 2015, warehouse construction numbers have steadily been climbing as companies expanded their e-commerce distribution networks.
Approximately 70% of warehouse space under construction is being built on speculation, CBRE said. The national vacancy rate for warehouses is 4.4% as demand has outpaced new supply in recent years, marking an increase of 19.2% in rent since 2015.
In the New York/North Jersey market, warehouse vacancy rates hit 3.4% (below the national average) and rents have increased by 4.8% over the past four years.
“In northern New Jersey, e-commerce continues to create a huge demand for new distribution space,” Kevin Dudley, first vice president, CBRE. “As online grocery sales continue to grow and given the state’s prime location to major consumer markets and local ports, we anticipate the warehouse vacancy rate to remain low, while rents steadily increase.”
CBRE’s report also identified the Top 5 markets for spec warehouse construction that offer below-average vacancy rates and strong rent growth.
- New York/northern New Jersey;
- California’s Inland Empire;
- Los Angeles;
- Las Vegas.
To see the full report, click here.